What are the differences between overseas and domestic forex trading? We'll explain who each is suitable for, as well as tax implications and profit/loss offsetting

want to start trading in overseas forex may not be sure what the difference is between overseas and domestic forex trading

"There are no taxes on overseas forex trading."

"It's dangerous, so you should avoid overseas forex trading."

"Overseas forex accounts allow leverage of up to 1000 times."

There are rumors about overseas forex trading, and it's intriguing to wonder what the truth is

This time, we'll give you a straightforward answer regarding the differences between overseas and domestic forex trading, focusing on safety and risks taxes and service details , so please use this as a reference to decide which is right for you.

If you're new to overseas forex trading, we recommend reading the complete guide for overseas forex trading beginners

I'll tell you the simple difference between overseas and domestic forex trading

Overseas forex trading and domestic forex trading differ in every aspect, including safety and service offerings

With so much information available, many people probably feel anxious

This website provides highly reliable information through thorough fact-checking let's look at the characteristics of overseas forex trading in comparison to domestic forex trading

item	Overseas FX	Domestic FX
base	abroad	Domestic
Approval from the Financial Services Agency	None. Unregistered businesses	Yes, registered businesses
Leverage	Up to 400-5000, and some even offer unlimited	Up to 25x (flat rate)
spread	Wide setting	Narrow setting
Margin call/stop-loss	No margin calls, zero-cut guarantee, stop-loss guarantee: 0% to 20%	Margin calls apply; no zero-cut guarantee. Stop -loss criteria: 50% to 100%.
Taxes and offsetting of profits and losses	Comprehensive taxation (tax rate 5% to 55%) , with limitations on offsetting gains and losses, and loss carryforward is not permitted.	Separate taxation (flat rate of 20.315%) , with limitations on offsetting gains and losses, and loss carryforward for 3 years.
currency pair	50 to 100 types	25 to 35 types
Bonus Campaign	Low-barrier new account opening bonuses, trading bonuses, cashback, etc.	High hurdles: New account opening cashback, trading cashback, etc.
Trading Tools	MT4 and MT5 are the mainstream	In-house developed tools are the mainstream
Deposit and withdrawal methods	Credit cards, some payment services, and domestic money transfers are accepted.	Domestic money transfer, bank transfer

Characteristics of overseas forex brokers 1: No base in Japan

First, it's important to understand the difference in "location" .

What is overseas forex trading?

Literally, "overseas FX" is a general term for FX services and FX companies that have their bases overseas. All overseas FX headquarters and branches are located abroad. The most significant characteristic of overseas FX is that they do not have a base in Japan

What is domestic FX?

Domestic FX and domestic FX brokers that have their headquarters or offices in Japan . Overseas FX brokers and securities companies with branches in Japan are also included in the category of domestic FX.

What are foreign-owned FX companies?

So-called foreign-owned companies are those whose headquarters are overseas but which have branches in Japan .

All FX companies with a base in Japan, including foreign-owned companies, provide FX services in accordance with Japanese regulations. Therefore, foreign-owned companies are distinguished from overseas FX companies

Characteristics of overseas forex trading #2: Not licensed by the Financial Services Agency

Another crucial difference between overseas and domestic forex trading is whether or not they are licensed by the Financial Services Agency

Overseas forex brokers that do not have a base in Japan are unregistered companies that have not obtained approval from the Japanese Financial Services Agency. This is a major difference from domestic forex brokers

All domestic FX brokers are registered with the Financial Services Agency

In order to provide financial services domestically, authorization from the Financial Services Agency (FSA) is required. Under the Financial Instruments and Exchange Act, all financial institutions, including FX brokers, are authorized and registered with the FSA.

You can check your registration status here

List of Registered Traders – Japan Financial Futures Association

Domestic FX services comply with regulations from the Financial Services Agency

Domestic FX brokers under

• Leverage restrictions: A uniform maximum of 25 times
• Setting a forced stop-loss: To prevent further losses
• Protection of customer funds: Segregated management (trust protection) at a trust bank

Specifically, this includes reducing risk through leverage regulations and preventing further losses for customers through stop-loss orders. , protecting customer funds through trust protection is mandatory.

Overseas forex trading is outside the jurisdiction of the Financial Services Agency's regulations

On the other hand, overseas forex brokers do not have a base in Japan,Unregistered businesses not authorized by the Financial Services AgencyNaturally, Japanese FX regulations do not apply. Many brokers offer high leverage, and trust protection is rarely applied

Thus, in terms of safety and reliability, domestic FX trading can be considered superior

For more information on the Financial Instruments and Exchange Act and approval from the Financial Services Agency, please see , "Why is overseas forex trading not recommended?"

"Unregistered does not equal danger"

important to note here that "unregistered" doesn't necessarily mean "dangerous .

This is because companies without a base in Japan do not need to be licensed by the Japanese Financial Services Agency . Overseas forex brokers are licensed by the financial services agency of the country in which they are based.

it is not illegal for Japanese citizens to use unregistered overseas forex brokers . What is illegal is when unregistered overseas forex brokers solicit customers within Japan.

However, among overseas companies,Be careful, as there are also unscrupulous scammers out thereThe Financial Services Agency and consumer centers have received numerous reports of overseas scams. Examples include the sale of expensive automated trading software and attempts to lure people into fictitious overseas forex accounts

Image of overseas companies committing fraud

In other words, while there are reliable and reputable overseas forex brokers, there are also dangerous scam brokers

Whether or not overseas forex trading is illegal is explained in detail here

The Illegality of Overseas Forex Trading: A Thorough Explanation of Financial Services Agency Warnings, Legal Perspectives, and How to Consult about Problems

Feature 3 of overseas forex trading: Incredible high leverage

Next, there are several significant differences between overseas and domestic FX services. One of them "leverage .

As you know, the maximum leverage in Japan is uniformly 25 times

Prepare to be amazed by the leverage offered by overseas forex brokers. While it varies by broker, can range from 500 times to virtually unlimited . Some overseas forex brokers even offer unlimited leverage, enough to silence a crying baby.

Why is the maximum leverage for domestic FX trading 25 times?

Incidentally, the reason why leverage is relatively low in domestic FX is because of leverage regulations

In fact, from the late 1990s to 2009, there was a time when leverage was 200 to 400 times in domestic FX trading. This was an era when many masters who became millionaires through FX trading emerged. On the other hand, there were also many traders who suffered huge losses, which led the Financial Services Agency to take action to regulate trading around 2010

Why is overseas forex trading so high-leverage?

As for overseas forex trading, they achieve high leverage by deliberately basing their operations in countries with lax regulations. In countries without leverage restrictions, brokers can freely set the maximum leverage .

Comparison of leverage between overseas and domestic forex trading

Now, let's compare the leverage effect of overseas forex and domestic forex trading using a $1 leverage

The idea is that leverage increases trading capital

With a margin of $1, domestic FX trading only allows you to trade $25 worth of assets. Overseas FX trading, however, allows you to trade $1,000 worth of assets with just $1. You can earn efficiently even with a small amount of capital

For information on the minimum deposit amount for overseas forex trading, please see "What is the minimum deposit amount for overseas forex trading?"

List of overseas forex brokers with low minimum deposits | A complete guide to brokers that allow you to start with small amounts or no deposits

Characteristics of overseas forex trading #4: Spreads tend to widen

Next, let's look at the spreads. Domestic FX brokers generally offer better spreads, while overseas FX brokers tend to have wider spreads overall

In reality, the spread is influenced by various factors. For example, one of these factors is the trading method adopted by the FX broker. There are two types of trading methods that brokers use: the "OTC method" and the "NDD method"

Brokers with low spreads are introduced in spread comparison and recommended overseas forex broker ranking

What is the OTC method for domestic FX?

First, let's explain the OTC (Over-the-Counter) method

It is said that the most common method of FX trading in Japan the OTC method (over-the-counter trading)

In this system, profits from cover trades and off-the-books trades become the FX broker's revenue. In cover trades, the FX broker earns a margin from a financial institution with which it has a partnership each time a customer makes a trade. In off-the-books trades, the broker is not required to refund the full amount if the customer incurs a loss, so the remaining amount becomes the broker's profit.

Thus, if revenue sources are other than the spread, the spread can be set narrower .

What is the NDD method for overseas forex trading?

The NDD (No Dealing Desk) method a completely opposite pattern . While it's not a universal rule, it's said that many overseas forex brokers use the NDD method .

In the NDD (No Dealing Desk) system, the broker does not participate in the trading process; customer orders are routed directly to partner financial institutions . Therefore, the broker needs to earn revenue through a spread as a commission.

However, some argue that operating solely on the NDD (Non-Dealing Desk) model would be difficult in reality. It's more realistic to assume that they are using a combination of the OTC (Over-the-Counter) and NDD models

List of NDD (No Dealing Desk) overseas forex brokers! Who are they recommended for? Which brokers are scams?

5 Characteristics of Overseas Forex: Favorable Margin Call and Stop-Loss Conditions

Now, one of the key differences between overseas and domestic forex trading that we should pay particular attention to the mechanisms of margin calls and stop-loss orders .

Comparing stop-loss criteria for overseas and domestic forex trading

Fortunately, overseas forex stop-loss levels, averaging 20% ​​to 30% . This offers the advantage of being able to wait until the last possible moment to capitalize on a trend reversal. Domestic forex brokers, on the other hand, often have levels of 50% to 100%, meaning forced stop-losses occur much earlier.

What is a margin call in domestic FX trading?

A margin call is an additional deposit requested by an FX broker to meet the margin requirement. While margin calls are a rule in domestic FX trading, there is no such rule in overseas FX trading

What is a zero-cut guarantee in overseas forex trading?

A zero-cut guarantee is system that compensates for negative balances if a stop-loss order is not executed in time due to rapid currency fluctuations . This system is adopted by most overseas forex brokers.

Even if a negative balance occurs, the zero-cut system will reset the balance to zero, significantly reducing the risk of incurring debt

Risks of domestic FX trading with margin calls and no zero-cut protection

Domestic FX brokers do not offer a zero-cut guarantee . This is because it is prohibited by law. In the past, scams that promised loss compensation were rampant, so now it is no longer possible to offer "zero-cut," which is an act of compensating for losses.

With zero cut / Without zero cut

To be honest, forex trading without a zero-cut mechanism can be extremely dangerous. During market crashes such as the "Swiss Franc Shock" and the "Lehman Shock," stop-loss orders may not be executed in timeTraders who suffered from massive margin callsA series of incidents occurred

Advantages of overseas forex trading with no margin calls and zero cut

of overseas forex brokers the effect of reducing the risks of forex trading . At the very least, it can be said that situations where you incur debt due to not being able to cut losses in time will not occur.

Are there no margin calls in overseas forex trading? An explanation of the disadvantages and mechanisms of the zero-cut system

Six characteristics of overseas forex trading: Unfavorable tax and loss offsetting conditions

Next, let's look at the differences in taxes between overseas and domestic forex trading. It's important not to assume that overseas forex trading is tax-free simply because it's conducted overseas. Taxes are levied on overseas forex trading as well . the tax burden is generally higher than with domestic forex trading .

How to calculate taxes on domestic FX trading

In the case of domestic FX trading, you are required to file a tax return if your FX profits (income after deducting necessary expenses) exceed 200,000 yen per year. The tax rate is calculated at 20.315% .

The 20.315% tax rate includes local resident tax (5%) and reconstruction special income tax (0.315%), making the calculation simple. Since the tax rate doesn't change regardless of how much you earn, more advantageous for traders who earn more .

How to calculate taxes on overseas forex trading

Taxes on overseas forex trading apply if your income other than salary exceeds 200,000 yen per year. The tax rate is determined by the total amount of income .

A tax system where the tax rate changes according to the amount of income is called a progressive tax system under comprehensive taxation

The following is a table of progressive tax rates published by the National Tax Agency

Tax rate tables for comprehensive taxation and progressive taxation

If your total income is low, you can keep the tax rate between 5% and 20%, but if your total income exceeds 7 million yen, the tax rate will rise to 23% or up to 45%When combined with local taxes, the tax rate can reach up to 55%butThis puts traders at a disadvantage as they have to pay a premium

Using a similar procedure, calculate your local resident tax (10%, depending on the region) and the special reconstruction income tax (2.1%), and then file your tax return

Differences in offsetting profits and losses between overseas and domestic forex trading

Next, let's look at the differences in how profits and losses are offset and carried forward between overseas and domestic forex trading

Losses from overseas forex trading can be offset against other income, such as from a side job. However, losses cannot be carried forward, so the entire profit in the following year will be subject to tax

With domestic FX trading, you can offset profits and losses with futures trading, including cryptocurrencies. Losses can be carried forward for up to three years. In terms of taxes, domestic FX is overwhelmingly more advantageous.

This article provides a detailed explanation of filing tax returns for overseas forex trading. Please refer to it as well

, we recommend reading this comprehensive guide to overseas forex taxation

7 Characteristics of Overseas Forex: A Large Number of Currency Pairs

When comparing overseas and domestic forex trading in terms of currency pairs there are significant differences .

small, ranging from 25 to 35, mainly consisting of major currencies and cross-yen pairs . A very small number of foreign brokers may offer more than 100 currency pairs.

With overseas forex brokers, you can trade not only major currencies but also a wide variety of minor currencies . Since you can choose base currencies other than the yen, such as the dollar, euro, and British pound, it's easier to tailor your forex trading to market trends and strategies.

Recommended Currency Pairs for Overseas Forex Trading | Explanation of Easy-to-Win Currency Pairs and Their Characteristics

Feature 8 of Overseas Forex: Abundant Bonuses and Campaigns

Another point worth noting is that overseas forex brokers offer a wide variety of bonuses and promotions .

FX campaigns are frequently held both domestically and internationally. However, domestic FX campaigns areThe hurdles to meeting the conditions are highTherefore, it seems that few people will benefit from it

of overseas forex brokers bonuses and cashback with no conditions or with low requirements . When you open a new account, you can receive a margin bonus of around 5,000 yen, and sometimes even tens of thousands of yen, which you can use for trading.

Check out the latest overseas forex bonus information the Overseas Forex Latest Bonus Campaign Ranking

Feature 8 of overseas forex trading: MT4 and MT5 are available

And the trading tools that are gaining popularity in overseas forex trading "MT4 and MT5" .

MT4 and MT5 (MT4 and MT5) refer to FX trading tools called MetaTrader

By default, it comes equipped with 30 technical indicators and 24 drawing functions. It boasts excellent expandability , allowing for unlimited functional enhancements through API connections and software installations.

Anyone can install and use included in MT4 and MT5

In the domestic FX market, proprietary tools are the norm, and there are virtually no tools that can rival MT4 or MT5. While more FX brokers, mainly foreign-owned ones, are adopting MT4, only a very small number of brokers offer the latest version, MT5.

10 Characteristics of Overseas Forex Trading: Limited Deposit and Withdrawal Methods

Finally, one important difference between overseas and domestic forex trading is the deposit and withdrawal methods. Using overseas services, regardless of whether it's forex or not,Restrictions on deposit and withdrawal methodsIt will happen

The most common methods for depositing and withdrawing funds from overseas forex brokers credit cards and payment services such as bitwallet . Some brokers also support domestic bank transfers, but the rules vary from broker to broker, which can be a bit confusing.

With domestic FX brokers, you'll rarely encounter any problems with deposits and withdrawals . Most offer instant deposits and withdrawals via online banking. Domestic FX brokers are more convenient and reliable

Summary of Overseas Forex Deposit and Withdrawal Methods | Recommended Banks and Explanations of Low-Fees and Fast Procedures

Advantages and disadvantages of overseas forex trading

Here, we've summarized the advantages and disadvantages of overseas forex trading

Five advantages, including high leverage and small-amount trading!

There are five main advantages to trading forex overseas

1. High leverage from 1000x to unlimited
2. No margin calls and zero-cut feature reduce the risk during sharp market downturns
3. The stop-loss level is set relatively low
4. There are plenty of bonuses and promotions
5. High-performance MT4 and MT5 are available

The biggest advantage of overseas forex trading is the ability to aim for large profits with a small amount of capital through high leverage. Another notable point is that the zero-cut system minimizes the risk during sharp declines.

Generous bonuses, a wide range of technical tools, and automated trading systems will help boost your motivation for FX trading

If you want to aim for large profits from a small amount of capital using high leverage, be sure to check out the tips and precautions for high-leverage trading

There are also disadvantages and risks, such as safety concerns

The disadvantages of overseas forex trading areSome FX brokers are unreliable, and in some cases, their fund protection measures are inadequateThat's the point. You should also be careful about the potential for increased losses with high leverage. Inconveniences with deposits and withdrawals, and the tax burden of progressive taxation are also points that need to be checked

Overseas Forex Broker Safety Ranking | Points to Check and How to Choose a Reliable Broker Explained

Who is suited to overseas forex trading?

What kind of person is suited to overseas forex trading? Let's check the following points

The most important thing when using overseas forex trading to understand the risk that "you are responsible for any problems that may arise ." With that understanding, and by choosing a reliable broker, you can fully enjoy the benefits of overseas forex trading.

Advantages and disadvantages of domestic FX trading

Next, let's take a look at the advantages and disadvantages of domestic FX trading

Five benefits, including trust protection!

There are five advantages to domestic FX trading

1. It is safe to use because it is approved by the Financial Services Agency
2. The funds are guaranteed through trust protection
3. Many brokers offer narrow spreads
4. The tax rate is fixed and losses can be carried forward
5. Deposit and withdrawal methods are easy and fast

Japanese FX brokers are licensed by the Financial Services Agency and are highly reliable, with thorough fund protection through trust arrangements . Their cost-effective spreads and significant tax benefits are also noteworthy features.

It offers excellent convenience for deposits and withdrawals, providing a user-friendly environment for traders

There are also disadvantages and risks to not having a zero-cut protection

What are the disadvantages of domestic FX trading?No zero-cut guaranteeThat is the case. During the Swiss franc shockWhat is the negative balance incurred in domestic FX?It amounts to 3.3 billion yenBankruptcy proceedings due to an unmanageable negative balanceSome traders have reported taking advantage of this

Even if a particular FX broker is highly secure, there are still risks involved in domestic FX trading

Who is suited to domestic FX trading?

Now, let's check the criteria for who is suited to domestic FX trading

If you prioritize financial security, such as trust protection is the only option. For those who are not attracted to high leverage or who want to minimize spreads, domestic FX will lead to lower costs.

The following article thoroughly compares the advantages and disadvantages of overseas and domestic forex trading. Please refer to it as well

The advantages of overseas forex trading are incredibly attractive! We'll also thoroughly explain the disadvantages and points to watch out for

Recommended overseas forex brokers based on reliability

While overseas forex trading is often considered high-risk, also true that many traders have used it for years without any problems .

Choosing that holds a financial license has a good reputation and

Finally, here are three recommended overseas forex brokers chosen for their reliability

"FXGT" is easy for beginners to start with

• Leverage: Up to 1000x
• Products offered: 53 currency pairs, 66 cryptocurrencies, 51 stock CFDs
• Minimum deposit: 5000 yen
• Bonuses: New account opening bonus, trading bonus, etc
• Financial License: Seychelles Financial Services Authority (FSA)

also open an FXGT account through our website, "Money Charger (Manecha) ." Registering through "Manecha" cashback . Please check it out!

FXGT Reputation and User Reviews | Independent Investigation into Safety and Rumors of Withdrawal Refusals

HFM also has a wide selection of overseas stocks

• Leverage: Up to 2000x
• Products handled: 50 currency pairs, precious metals, commodities, foreign stocks, ETFs, foreign bonds
• Minimum deposit amount: None
• Bonuses: Deposit bonuses, trading contests, and other events
• Financial License: Seychelles Financial Services Authority (FSA)

Open an HF Market account through our website , "Money Charger (Manecha)," cashback . Enjoy extra savings while trading overseas forex!

HFM Reputation and Reviews | Thorough Investigation of Safety and Withdrawal Refusal Cases

For execution speed, choose Axiory

• Leverage: Up to 2000x
• Products handled: Over 60 currency pairs, precious metals, stock indices, energy
• Minimum deposit: 20,000 yen
• Bonuses: Deposit and trading bonuses for new account openings, etc
• Financial license: Belize International Financial Services Commission (FSC)

AXIORY doesn't offer an account opening bonus, but they occasionally run campaigns where you can get cashback for every trade. If you apply through , "Money Charger (Manecha)," you can get cashback

AXIORY Reviews and User Feedback | Thorough Investigation of Safety and Withdrawal Refusal Cases (AXIORY)

Summary: Try out overseas forex trading first

As we've seen, overseas forex trading and domestic forex trading differ significantly in many aspects, including safety . It's crucial to carefully consider whether overseas forex trading is right for you, and to do so at your own risk. Choose a trustworthy overseas forex broker based on reviews and reputation.

The biggest appeal of overseas forex trading is that, as long as you manage your risks properly, it's easy to make money even with a small amount of capital. you open an account through our website, "Money Charger (Manecha)," you'll receive a cashback bonus. Why not take this opportunity to try overseas forex trading for the first time?

Top Recommended Overseas FX Brokers Ranking | Thoroughly Introducing the Best Trading Environments by Category