Investing and share trading on the London Stock Exchange is an accepted part of financial management for UK residents, but have you considered trading in shares in the USA as an alternative?
Online stock brokers are revolutionising the purchase and sale of stocks and shares. Efficient web based trading screens now allow you to research and trade shares without having to call your broker to buy and sell. You have access to market data twenty four hours a day.
Using online trading systems is making it easier to trade on the London Stock Exchange, but systems now exist to allow you to trade stocks in other countries such as the USA too.
There are real benefits to share trading in the USA, as we discuss in this article, however you should always take into account risks and realise that the value of stocks and shares can go down as well as up, no matter in which country you trade.
Saving stamp duty
As we have previously explained, stamp duty is not due on share purchases in which the share register is not held in the UK, or the company is not registered in this country.
This means that if you purchases shares in an American company that meets the above criteria, you will not pay stamp duty on that transaction. This can save frequent traders a lot of money over time.
Short term and day traders benefit from large daily swings in share prices. One of the most volatile sectors is technology stocks listed on NASDAQ, particularly those with low capitalisation.
The NASDAQ trading environment is fast paced with some stocks experiencing large percentage swings. This can be a brutal environment too, with share prices tumbling by several dollars in a matter of minutes, so extreme caution is called for when monitoring your trades.
For the experienced trader or investor, the volatility of NASDAQ listed shares can offer a more dynamic and potentially rewarding marketplace than the often more sedate London Stock Exchange.
Lower trading commissions
Some USA based online stockbrokers allow UK residents to trade US listed stocks. By carefully comparing trading commission costs, you will find that some of these stockbrokers only charge around $6 per trade, irrespective of the number of shares in the transaction.
With the current dollar vs Sterling exchange rates, the costs of trading in US stocks can be very low, which is ideal for frequent traders.
You will need to transfer your sterling into $USD to fund a US based trading account and all subsequent trades will be in dollars so you have to ensure that your overseas broker can transfer money back to the UK in Sterling.
You will also come under the trading rules of the US Securities and Exchange Commission which can limit your day trading activities unless you have a minimum holding of US based securities in your account.
Extending the trading day
Trading hours in the USA are five hours behind the UK so if you are keen to trade shares for as long as possible, then you can currently extend your trading day up to 9pm in the evening.
Evening trading in the USA via the Internet for UK residents can be useful particularly if you are at work during the day and would like to trade stocks and shares in your leisure time during the evening.
Please be careful though
Trading in stocks and shares in the USA can be highly rewarding, however it is also very risky. You are dealing with economic conditions and trading sentiments in a foreign country so you may be at a disadvantage compared with American traders.
The value of stocks and shares can go down as well as up and your capital is at risk when you participate in trading and investing in the stock market.