Which is better for securities companies and brokers, domestic or overseas?
When starting FX, the first thing you wonder about is
whether to use a "domestic broker (securities firm)" or a "forex broker abroad," which is the better choice.
From SNS and the like, you often hear voices such as, "FOREX brokers abroad earn more money," and "high leverage makes things more efficient."
On the other hand, there are warnings like, "FOREX abroad is dangerous" and "there is a risk you can't withdraw."
So, which is really better?
This includes Trader Hiro's personal opinion, but I would like to summarize below.
■ Merits of FOREX brokers abroad
The biggest feature of FOREX brokers abroad is the "zero-cut system" and "high leverage."
Zero-cut means that even if your account balance goes negative, there is no margin call (no obligation to deposit more).
In other words, no matter how rapidly the market moves, you will not incur losses beyond your account funds.
Also, with FOREX abroad, high multipliers like 500x–1000x leverage are common.
Because you can hold large positions with little capital, many people think you can manage funds efficiently.
However, zero-cut is a system that endures up to the brink of collapse, and if used incorrectly, your account can vanish in an instant.
High leverage equals high efficiency, but operating at the edge of collapse—losing money each time—can be seen less as a merit and more as a risk to asset preservation.
■ Demerits of FOREX brokers abroad
"Taxes are high"
Profits from FOREX abroad are treated as "miscellaneous所得 (income from other sources)" and the tax rate rises as your income increases. It can be as high as about 55%.
Compared to domestic brokers, where the rate is a fixed about 20%, the burden is considerably heavier.
"Withdrawal rejection and operational risk"
Since they are not under the Financial Services Agency's supervision, Japanese law does not apply in case of trouble.
There are cases where withdrawals are delayed or even refused in the worst case.
"Risks of transferring funds"
Recently, more brokers accept cryptocurrency for deposits and withdrawals, but if you send to the wrong address, you may lose your funds.
Also, there have been reports of bank accounts being frozen due to remittance history with FOREX brokers abroad.
■ Merits of domestic brokers
The appeal of domestic brokers is primarily the "peace of mind" and "tax advantages."
"Taxes are low"
Profit from domestic FX is taxed under a separate taxation regime, at a flat rate of about 20.315% (including resident tax).
No matter how much profit you make, the tax rate does not change. This is a very big merit.
"Higher fund safety"
There is almost no concern about withdrawal refusals, and there is mandatory trust protection.
Even if the broker goes bankrupt, customer funds are protected.
"Safe and simple fund transfers"
Deposits and withdrawals can be done through domestic banks, so transfer errors and freezing risks are minimal.
■ Demerits of domestic brokers
The only weakness is the "leverage restriction (maximum 25x)."
Compared to FOREX abroad, it may seem less efficient, but even 25x is enough for trading in practice.
In fact, this restriction helps avoid excessive positions and makes long-term, stable operation easier.
With high leverage you can place larger lots, but
if you increase the lot size, drawdown also increases at the same rate, making it hard to endure unrealized losses.
FX is said to be an investment where profits come after temporarily surpassing unrealized losses.
Therefore, you need to operate with a lot size that can tolerate unrealized losses.
From that perspective, I think the domestic environment, where sound money management is possible, ultimately gives you a better chance of survival.
■ Conclusion: A balanced choice is "domestic brokers"
Indeed, FOREX brokers abroad are attractive for their immediate efficiency and freedom.
However, when looking at overall balance of tax, safety, and ease of fund management,
domestic brokers are more favorable for long-term capital growth.
Also, since funds circulate domestically, I think contributing to the Japanese economy as a Japanese citizen is more advantageous than contributing to FOREX abroad.
FX is most important to consistently win.
In that sense, at least for the main operations, I recommend solidifying your foundation by using a domestic broker.
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