Best brokers for international trading
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If you’re looking to trade foreign stocks, you need a broker that allows international trading, and not all brokers do. The ability to trade foreign stocks greatly expands the number of companies you can own, and it can be a great way to add diversification to your portfolio.
Here are the best brokers for international trading and some key things to watch when trading foreign stocks.
How to trade foreign stocks
Most American investors can already access some stocks of foreign companies if they have a brokerage account in the U.S. That’s because many of the largest foreign companies such as BMW or Nestle already trade on American exchanges as what are called American depositary receipts (ADR). ADRs can trade on a major exchange like the New York Stock Exchange and Nasdaq or on a smaller, less liquid marketplace such as the over-the-counter market.
But many other foreign companies are completely inaccessible to American investors, and so it’s necessary to buy them directly on their home stock exchanges. The best brokers for foreign stocks allow you to buy these foreign stocks on the local exchange, not simply the ADR. So you’ll be able to buy the same stock that a local of the country would purchase.
Nonetheless, buying foreign stocks comes with some risks, including currency and regulatory risk, in addition to the standard risks of investing in individual stocks.
- Currency risk: You’re exposed to the risks of the company’s operating currency, so your investment will be impacted by the foreign country’s inflation, its monetary policies, its overall financial health, and of course its exchange rate against the dollar. A strong dollar makes your investment in the foreign stock worth less, all else equal.
- Regulatory risk: You’re exposed to the governance policies of the country where the company is based. The laws and overall regulatory environment can differ vastly from what American investors are used to, creating greater challenges for those unfamiliar.
Still, accessing foreign stock markets opens up significant opportunities to find undiscovered stocks, if you’re willing to do the significant work of researching them.
Best brokers for international trading in April 2023
If it trades on a public market, you can trade it at Interactive Brokers, or at least it seems that way. The broker provides access to markets in 33 countries, including Canada, Mexico, the U.K., Germany and Japan. The broker is well regarded for its trade execution, its trading platform and its low margin rates. Of course, you’ll still be able to trade U.S. stocks and the whole range of securities on the broker’s Pro and Lite tiers, the latter with $0 commissions.
TradeStation lets you trade international stocks through its TradeStation Global account, which differs from its core U.S.-focused account, where you can also buy foreign stocks listed in the U.S. It offers the same access to global markets as Interactive Brokers – 33 countries, including European and Asia-Pacific markets – because it’s powered by Interactive Brokers’ platform. If you’re going global with TradeStation, you can still use that broker’s charting, trading and analysis tools, but you’ll also be able to access Interactive Brokers’ core trading platforms, too.
Fidelity offers plenty of choice when it comes to international trading, allowing you access to 25 markets, including the biggies such as Canada, Germany, Hong Kong, the U.K. and many more, primarily European. You’ll be able to settle your trades in dollars or the local currency, and you’ll get real-time market data when those foreign markets are open. You’ll be able to trade U.S. stocks and foreign issues in the same account, meaning it’s just a bit easier to manage things.
Charles Schwab lets you trade foreign stocks through its core brokerage account, allowing you to buy and sell ADRs and foreign stocks on the OTC markets in 30 countries, including Canada, Germany, Mexico, the U.K. and many more European markets as well as Hong Kong. You’ll also be able to trade directly in local currency in 12 markets if you set up a Schwab Global account, including Germany, France, Hong Kong, Japan, the U.K. and more.
If you’re looking to trade Chinese stocks, then the relative newcomer moomoo may be for you, since it offers a rare option for U.S.-based traders. An account here allows you to buy Hong Kong stocks and China A-shares, which are listed in Chinese renminbi on the Shanghai or Shenzhen exchanges. That access is a key differentiator for this broker, though it’s also delivering value for clients via its below-average rates for margin loans. While traders will have no problem setting up an individual account, those looking for other types are out of luck.
If you’re looking for more undiscovered stocks that could deliver great returns, then hunting in foreign markets could be a great option for you. But be sure you understand the new and different risks posed when you go prospecting for hidden gems in a foreign stock market.