The Industry’s Best Kept Secret: Trade the Low Cost U.S. Stock Market When You Do Not Live In The U.S.ABy
I recently received an email from a new student who purchased the Liberated Stock Trader Pro training.
“Your training program appears to be excellent, but I have no way of being able to carry out Fundamentals Stock Screening on the ASX (Australian Stock Exchange) without spending thousands more dollars on the Metastock RT program”. A.Z. New Zealand.
The core problem here is that:
- He lives in a country where trading the local stock market; in this case the Australian Stock Exchange (ASX) costs $95 per trade
- He cannot get a good high quality stock market software platform at a reasonable price
- International stock market software including powerful stock market screening is prohibitively expensive for regional markets; $1000′s per year
- There are no high quality online free stock screeners he can use for his exchange
- For the new trader the costs are insanely high
But there is a solution
The situation when trading the U.S. Stock Markets
- Brokers typically cost $5 USD per trade regardless of trade size because there is huge competition
- The quality of U.S. Stock Market Analysis Software is vastly superior due to the competition
- The low cost of Stock Market Analysis Software leads the industry in the U.S. because of competition
- You can get excellent stock market analysis software like Telechart 2000 with powerful integrated stock screening for as little as $29 per month
The situation when trading regional stock markets
- Cost per trade with local brokers is sky high because of lack of competition, seriously $95 per trade is outrageous
- Quality of Stock Market Analysis Software can be excellent but due to lack of scale the cost is also higher.
- Many country exchanges charge a premium for their data feeds which add to overall trading cost.
One solution is not to trade your local stock market, but to directly trade on the U.S. Stock Markets bypassing your thieving local banks and brokers and exchanges.
You will get all the advantages of:
- LOW transaction costs
- High quality low cost software
- The possibility get to trade in your evenings after work, or mornings before work depending on your location.
- You will get to trade in a reasonably well regulated stock market with high volumes and good liquidity on thousands of the worlds best companies.
The Best Kept Secret in the Industry THEY do not want you to know
You can do want I do. I live in Germany but trade directly on the U.S. exchanges. I use Telechart 2000 from Worden Brothers as my analysis software. I get the advantage of using a U.S. Broker (TD Ameritrade or Tradestation are excellent low cost brokers) and I get to develop my strategies during the day and trade in the evening.
How can I trade directly on the U.S. stock markets with all these advantages?
The U.S. has a series of tax treaties with many countries. This means if you are non resident, meaning you live outside the U.S.A. you can trade and profit in the U.S. without having to pay “withholding tax” in the U.S.
Withholding tax is a tax on your investments applied when you actually sell a stock. Withholding Tax is applied to all those people who do not have valid tax credentials in the U.S. Withholding tax is at 30%. This means that if I by stocks for $1000 and I sell them a few days later for $1,000 I will pay $300 tax. It is like an emergency tax because you to not have a valid tax code.
As you are non resident, meaning you are a New Zealander living in New Zealand, you cannot get a tax code in the U.S. In fact you do not need a tax code. The U.S. has a tax treaty with New Zealand meaning that my student can actually be exempt from all TAX in the U.S. and simply declare his profits in New Zealand and pay the tax at his local rate to the New Zealand tax authorities at the end of the year, this is called a double taxation treaty.
How great is that?
Start Trading in the U.S. Checklist
All you need to do as a non resident is do the following:
- Check that your country has a Tax Treaty with the U.S.A.. IRS United States Income Tax Treaty Countries.
- If your country has a treaty – then download a W8-BEN form and complete it according to the guidelines. Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding
- Select your Broker: Tradestation is excellent because you get low transaction costs and great software free when you are a brokerage client. See my review here. You can choose any broker and combine it with the excellent Telechart 2000 as featured in my book “the Liberated Stock Trader”
- Submit your W8-BEN form to the broker and wait for confirmation that your W8-BEN form is accepted and you can trade without paying withholding tax.
- When your account is open you can do an international bank transfer to get your funds across to the U.S. so you can start trading
Tip: Be careful your W8-BEN will expire on the last day of the third succeeding year. So you will need to fill out another one and send it to your broker to regain your U.S. Tax free status.
I have been training the U.S. markets for almost 20 years and I have to say it is great. The news content provided by companies like Benzinga is world class and ahead of other countries. The U.S. has many of the greatest technology companies in world like Google, Microsoft, Facebook, HP, IBM and many other industry leaders. The low costs and the breadth of the market means you can select from the best of the worlds leading economy.
Enjoy your future trading in the best financial market in the world.
Note: I am not a professional tax adviser. Do your research and make sure your Tax Treaty covers this. You can ask your selected U.S. broker for advice and confirmation you are covered.
Please leave a comment or your feedback on this article I will gladly answer any questions.