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We bring you all you need to know to master the trade all in one place for your convenience and to safeguard your journey into the online currency market world. We have your back in security to help you with the foreign exchange market by showing you in details how to find regulated and reliable brokers who will help you meet your goals.
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General Risk Warning : Trading financial products carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose.
General Risk Warning : Trading financial products carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose.
What is Forex ?
Forex, also called foreign exchange market or FX for short, is the world’s biggest financial market. Much like your traditional grocery store where buying and selling activities take place on business days, the Forex market is equally busy with buyers and sellers who exchange currencies on daily basis.
To put it in a more technical perspective, Forex is a decentralized and over-the-counter global market where currencies of different countries are traded globally. Many people, especially travelers take part in Forex trading without knowing. Take for instance when you find yourself at the airport of another country with your local currency or dollar in your possession. The next place you’ll most probably move to is the currency exchange booth at the airport. You’ll need to exchange the money with you with that of the country you’re about to enter, else, you won’t be able to transact efficiently when you move into the communities.
When you travel from the US to the UK for instance and exchanged the dollar notes in your possession for the pounds sterling at the hotel or airport, you have participated in the Forex market that way locally.
Know that different rates apply to all the currencies you exchange. Your one dollar will not necessarily be equal to one pound. The exchange rate at the time determines what you’ll have in your hands. You should find your dollar going for less than a pound in this instance according to the current exchange rate. Don’t be surprised when you enter a new country with a few dollars in your wallet and when exchanged, you’re given a briefcase instead to hold all the money you’ve exchanged. This is how the generality of the global populace participate in Forex in a non-automated way.
The Size of the Foreign Exchange Market
The size of the foreign exchange market is what makes the difference and the reason behind how busy the market is. You have a huge sum of $5 trillion exchanging hands daily in the Foreign Exchange Market as against the less than $1 trillion daily volume of the New York Stock Exchange market. This volume is multiple times the volume of the New York Stock Exchange (NYSE), the largest stock exchange market worldwide. In fact, it is more than three times the sum of all the futures and stock markets put together.
The high volume of trade on daily basis is the attraction and gives a high prospect to the financial world and individuals who are interested in the financial market.
Who can trade Forex ?
The history of the Forex market dates back to the post World War II era when major currency pairs were valued against that of gold. The system which was unsustainable after economic growth and very high cost of gold was abolished to open up a free market. This resulted in an easy exchange rate.
The adoption of the internet brought a new light into Forex trading. Small companies and banks developed online systems to enable automated quotes for people to trade immediately.
Prior to the internet trading era, the Forex market was traded by big corporations, hedge funds, financial institutions including the central and commercial banks, and individuals who are very rich.
The incoming of the internet, however, opened things up for small-scaled investors and retail traders. Interestingly also, individuals at home can now also trade Forex just like the big organizations are privileged to do. Regulation and technological improvement led to having brokers who are able to provide a platform for individuals to buy and sell Forex. This also opened the door to encourage retail Forex brokers to springing up to help different categories of traders to place their orders all around the world.
Famous Traders Motivational Quotes
What is Forex Trading ?
Forex trading is simply buying and selling of currencies. Here, two currencies are either bought or sold at the same time. When you exchange your dollar for a Japanese yen (USD/YEN), you have traded Forex. You give away one to have another simultaneously.
Technically, currencies are transacted to boost international trade, balance the markets and to make a profit. Banks, institutional investors, corporations, and individuals trade Forex.
The Forex market remains open 24 hours daily five days of the week to allow traders to buy and sell currencies on the floor.
People trade Forex because of the different exchange rates as they change frequently. The value of all the currency pair is influenced by political, economic and environmental factors including wars, national elections, and natural disasters. Individual traders hope to catch on these changes to make some profits quickly when a currency is more favored than the other.
Have in mind that any high earning investments also carry high risks. This also applies to Forex trading. Therefore, Forex trading will only be good for those who are willing to take a risk. It is not a get-rich quick scheme as some may think it to be. You win some and sometimes may also lose some. In fact, there is a high risk involved in trading forex. It is advised that you only take calculated risks. Evaluate the level of the risk involved before deciding to place an order in the Forex market.
You should be familiar with the following risks when trading Forex:
- Liquidity risk
- Credit risk
- Exchange rate risk
- Country risk
- Leverage or marginal risk
- Interest rate risk
- Transactional risk
To have a better insight into what the Forex trading is and the risk involved, a good Forex school will be a good place to start Forex trading for beginners. There, you’ll learn the fundamentals before committing huge funds into a live trade if you hope to have a favorable reward for your trade.
Trading Currencies in Pairs
Currencies are traded in pairs during a Forex trade. As one is sold, another must be bought simultaneously. You’ll often find them written with a forward slash to separate the two currencies involved in the pair. For instance, X/Y is a typical representation of currency pairs. Currency X, in this case, is referred to as the base currency while currency Y is the quote currency. The selling point for making gains in Forex trade is the fluctuations between a currency pair. The stronger currency at the time is most times favored by traders to make some gains. Seven such major currency pairs exist in the Forex market. These are:
- USD/JPY- the United States/Japan
- EUR/USD- Eurozone/United States
- GBP/USD- United Kingdom/United States
- USD/CHF- the United States/Switzerland
- USD/CAD- the United States/Canada
- AUD/USD- Australia/United States
- NZD/USD- New Zealand/United States
These major pairs are the most liquid of all the other pairs. They are the most traded pairs in the world. Significantly, the US dollar is visible on one side of these currency pairs because it is about the most viable currency in the Forex market.
There are currency pairs that don’t necessarily contain the US dollar as one of the two currencies in the pair. They are known in the Forex trading parlance as the “crosses”. For instance, GBP/NZD can be considered one among the crosses.
There are major crosses that are traded frequently. These major crosses, also known as minors, are the three major currencies apart from the US dollar. These are the GBP, JPY, and EUR.
Other crosses also exist besides the major crosses. These do not contain the three other major currencies above. They contain a pair of the NZD, CHF, CAD, and AUD. You’ll find for instance, crosses such as the AUD/CHF and CAD/CHF.
Exotic currency pairs are not major pairs or the crosses mentioned above. They are currency pairs that contain a major currency paired with another currency from an emerging economy. Hungary, Mexico, South Africa, and Brazil fall among the emerging countries that have the privilege of getting paired along with other major currencies in the foreign exchange market.
Like mentioned, the exotic pairs are not as active on the market as the crosses or the major currency pairs in the Forex exchange market. Also, know that you may not have all exotic pairs available for trade with every broker. It depends on what your broker has to offer. When available, you may also have their transaction costs a little higher than the rest of the other pairs.
Here is a list of some exotic pairs you find useful if you want to try them out.
- USD/HKD- the United States/Hong Kong
- USD/ZAR- the United States/South Africa
- USD/Singapore- the United States/Singapore
- USD/MXN- United States Mexico
- USD/SEK- United States/ Sweden
On these pairs, it is normal to find spreads that are more than two times larger than you’ll have with USD/JPY or EUR/USD after completing a trade. This is an indication of how unstable they may be. Trading with them will require more caution and carefulness. The risk is higher with a very volatile currency.
Where to Trade Forex ?
To begin your Forex trading journey, the right trading software and finding a reliable, regulated and licensed Forex broker are where to start from.
Why Reliable Forex brokers ?
Forex brokers are your link to trading in the Forex market. You cannot execute a trade without them. For this, an account with them is a must if you’ll ever trade Forex.
A Forex broker is usually a company that makes available a Forex trading platform for the currency traders to make a transaction at the foreign exchange market. The firms are sometimes also called retail Forex brokers. They handle a very minute portion of the total volume of the foreign exchange market. Forex brokers stand as an intermediary between the market and the traders or investors. Among other functions, Forex brokers perform vital functions which include:
- To forward to the exchange market the buy or sell orders carried out by his client.
- To make available various financial instruments through the trading platform to the customers in various accessible platforms.
- To provide feedback on the outcome of the executed orders. In this case, whether it is rejected, accepted or stuck somewhere.
- Traders use the platforms or trading software provided by the brokerage firms to execute transactions on the foreign exchange market.
To start trading currencies through a broker, you’ll need to open an account with a reliable Forex broker to begin trading currencies. It is much like you’re opening an account with a bank. Some documentation such as verification of identity are some steps you’ll need to go through before you can start trading currencies with the most reputable Forex broker.
A Demo Account
It is best to start trading Forex with a demo account. A demo account is provided by most Forex brokers. You only need a few personal details to start trading by using a demo account. The purpose of a demo account is for you to first test the waters before committing real funds to a live trade. A demo account gives you some days or weeks as the case may be to practice without depositing money. This is where to start from as a beginner until you’re sure you are prepared to commit real money for a live trade. Most reputable Forex brokers provide a free demo account for their subscribers to first try things out with them. This requirement should be included in your initial research to find a reliable and trustworthy Forex broker you’ll be happy registering with.
Forex brokers allow their customers to trade all the seven major currency pairs and the minor currencies. Many also provide their customers the ability to trade the exotic currency pairs, the currency pairs between the major currencies and the emerging markets.
How Forex Brokers Earn Money ?
Forex brokers make their money in two ways.
The first is a compensation system from the bid-ask-spread of a currency pair. A currency spread is the difference between the buy and sell price of a currency. For instance, if a currency’s buy price is 1.0000 and was later sold for 1.0010, the bid-ask spread is 10 pips or $0.0010.
The second way by which Forex brokers earn money is by charging traders transaction fee. Some brokers have dropped their transaction fee significantly or have totally removed it completely to stay competitive in the business.
Among other things, reliable Forex trading software is crucial to currency trading success.
Different Types of Forex Trading Software
Forex trading software for personal use has seen a lot of growth in the past years in the industry. Different types of Forex trading software have therefore emerged and used by individual Forex traders.
The following are the trading software you may come across when trading Forex:
Forex Trading Platforms
Forex trading platforms are software provided by brokers for users of their system to manually open and close a trade online with the broker. This is the primary software you need to trade forex. To use the trading platforms provided by brokers, you’ll need a very good internet connection. If the option of downloadable software is available, you’ll mostly find this to be available for window-based computers only.
Trading platforms with advanced features offer users charting functionality, the ability to run and manage multiple trading accounts and also provides algorithmic trading support.
Technical Analysis Software
One of the most important software for Forex trading is the charting software. This is technical analysis software. The software may comprise some computer programs that enhance the use of technical analysis techniques to review exchange rates.
The basic charting software will give the opportunity of plotting the movement of the exchange rates over time for a specified period even to well-known technical indicators such as Moving averages, RSIs and as well draw trend lines.
More advanced features of charting software support pattern matching algorithm, using Elliot Wave Theory for analysis of exchange rate movement, additional line drawing options such as channels, displaying pivots and Gann lines, among others.
Trading Signal Generators
Forex trading signal generating software provides the Forex trader the stage at which it is suitable to enter the market. This usually comes through a form of alert to acquaint the trader of the opportunity. The signal generators usually suggest a stop-loss and also a take-profit level to help the trader manage his gains or loss at the particular positions generated by the software.
Finding the best trading signal service provider is always advised to avoid scam and unreliable trading signals.
Automated Forex Trading Software
Automated Forex trading software works by following a pre-defined trade algorithm or plan without needing to carry out a manual order procedure. They are sometimes referred to as Expert Advisors (EAs). They are found to run more on the MetaTrader4 platform.
Automated trading systems help a Forex trader to overcome emotional attachment to trading currencies when set up to run. Using an automated system takes away every human and personal feeling that may influence a trading decision. Forex trading robots fall into this category, though, they are not recommended and are a bit different from the automated systems mentioned above. Beginners on Forex trading can get assistance from an automated Forex trading system to learn how an expert trades.
Types of Forex Brokers
One of the most important considerations to take very seriously is your choice of a Forex broker. The type of Forex broker you choose has a significant contribution to successfully trading Forex. Take some time out to research what you really want from a broker.
There are various types of Forex brokers. Basically, two groups can be the broad classification:
- Dealing Desk Brokers
- Non-Dealing Desk brokers
Dealing Desk Forex Brokers
Dealing desk Forex brokers are also called market makers. This is for a reason that they make sure to create a market for their clients by actively participating in the whole process. It is just the way it sounds. They make the market by fixing the prices and search for a matching order to make sure a trade is completed.
They as well play the role of counterparty by standing in the opposite side of their clients' trade when the need calls for it. You may consider this more like working against your own customers in this type of brokerage.
They are responsible for the transaction quotes of their clients. Clients who are with dealing desk brokers are not aware or see the actual interbank rates of the various currencies on the market, though the rates are almost at par with the interbank rates most times. Dealing desk brokers, besides forwarding your orders to the market can also take part in the opposite end of the trade if a matching order is not found to complete the trade.
Dealing desk Forex brokers only create an artificial market of exchange rates for their clients. As market makers, they are in control of both the demand and supply prices this way. This goes to show that for them determining fixed prices is not that a risky thing to do.
A typical example transacting through a dealing desk Forex broker is as follows:
Let’s assume you placed a buy order of USD/GBP (that is, to buy USD and sell GBP). To execute your request, the dealing desk broker will initiate a search from among other clients in his platform to find a sales order that tally with your purchase order in a bid to complete the transaction. He can as well forward the orders to a more liquid supplier of his. This is a big entity that has the potential to swiftly buy or sell large financial positions. By going this way the broker minimizes risk and profits from the spread after the completion of the trade between the two clients. He doesn’t need to take the opposite side here if a matching order was found and the trade was completed successfully.
How a spread is arrived at
When a Forex trade is opened by a client with a broker, the order is passed on to the internal market. In the process, the broker gives a different price that is a little bit different from what is available on the market. This is often termed collecting the spread. The spread is a commission that is implemented in a transparent way and it’s seen by the trader as well. The good thing from the brokers’ view is that the spread is sourced from the leveraged trade size of the trader and not from his account balance size.
In the situation that a matching order was not found, the dealing desk broker goes ahead to assume the opposite position against his client to make sure the order is executed successfully. In this situation, if he loses, the trader earns and gains when the trader loses.
The normal scenario is for a broker to find a specific matching buy order from other clients if you’re selling. His liquidity provider who is very active in transacting financial assets is also given the opportunity to take part in the trade if the need calls for it. If the transaction is executed, the broker earns from the spread in the trade.
It is important to note that the broker does not pass the trade to the global Forex market when applying a dealing desk platform. He deals with an artificial internal Forex market that he creates.
No Dealing Desk
No-dealing desk brokerage is simply not taking the counterparty position as a broker but the order is passed on to the global Forex market. The No-dealing desk broker simply connects two matching orders to complete a transaction. No dealing desk brokers earn by charging a small commission on the trade. They can also slightly increase the spread in the traded currencies.
No dealing Desk can be subdivided into two:
- STP- Straight-Through Processing
- STP+ECN (Electronic Communication Network)
A straight-through Processing (STP) is a system that is operated by No dealing Forex brokers. An STP Forex broker sends their clients orders directly to the liquidity providers that have contact with the interbank market. Each liquidity provider usually quotes its own ask and bid price. For instance, if a No dealing desk Forex broker has several liquidity providers, each will quote his own ask and bid price from which the trader will be left to choose from.
An ECN Broker
Reliable ECN Forex brokers are brokers that permit the orders of clients to interact with orders placed by other ECN participants. These participants can be any entity such as retail traders, banks, hedge funds, mutual funds, and other brokers. Here, participants are given the freedom to trade against each other in the network by offering their own ask and bid prices.
The ECN broker allows clients to have a view of the “Depth of Market”. The Depth of Market shows where other market participants’ sell and buy orders are. The nature of the ECN system is such that it is not a simple one to have a fixed markup. Therefore, ECN brokers are compensated via a small commission from the transactions made.
Both Dealing desk and No dealing desk Forex brokers are safe for trading, if they are regulated and licensed.
Types of Trading Platforms
A Forex trader carries out his trading activities from a trading platform. It is part of the Forex broker’s responsibility to provide a good trading platform for his customers since the trader can only place an order by using a broker’s trading platform.
A user-friendly and as well an easy to operate trading platform should be the hallmark of a good trading platform, especially for beginners. When you’re signing up with a Forex broker, you’ll want to test the platform by first going through the demo account to see how things work out. Never be in a rush to start a live trade.
Different types of trading platforms exist and it differs from broker to broker. It is important that an intending trader is knowledgeable about the various trading platforms and the type provided by his broker. This is because the type of platform operated by your broker will significantly affect the outcome of your trade. You can take some time to try out as many trading platforms as you can before deciding on one that is best for your trading needs.
Usually, trading platforms are classified based on some factors. The link between all platforms is that they are operated by using the internet to connect to the Forex market.
That said, here are the various trading platforms you’ll need to understand how they work:
Classification based on Format
First off, all trading platforms can generally be classified into the format group. When talking of format, Forex trading platforms can either be:
- Downloadable format
- Non-downloadable format
A downloadable Forex trading platform is a version of the software you’ll need to download and install on your device. They are executable files you’ll have to run all the time from your computer or other compatible devices to participate in a trade in the forex market. The downside to trading on this platform is that you’ll have to be with the particular device all the time to access your account. This type of application can be available for mobile and PC.
The non-downloadable Forex trading software is the web-based version of the trading platform. This type of currency trading platform is universally used because of the convenience that comes with their use. You can run the software on any device whenever you want to. All you need do is to login with your account details if you already have one and you can join the global trade that way from any device that is connected to the internet. The obvious advantage here is that you’re not device-restricted. You only need your login details to start trading. Java programming language is mostly used to develop these platforms.
Classification based on a Programming language
Basically, the most popular Forex trading platforms are the classification based on programming languages. Many Forex brokers use these platforms the most in their system. Here are the major ones that dominate the market.
MetaTrader 4 (MT 4)
MT4 is one of the most widely used trading platforms provided by brokers for their customers. It is software that provides fast execution of trades, thus, making it a reliable one in the market. With it, you can carry out one-click trading. You can also access an automated trading (Expert Advisors) with MT4. Among other advantages, it also allows back-testing functionality.
MetaTrader 5 (MT 5)
MT 5 is the current version of MT4. As an upgrade of the MetaTrader 4 version, it comes with additional capabilities. The user interface is not much different from the MT4 version. More inbuilt tools make it more functional than the previous version. There are charts and indicators for traders’ guidance and it also allows traders to import trade signals from MetaTrader social community.
Both the MT4 and MT5 are designed by using the Metaquotes language (MQL).
cTrade is an Electronic Communications Network (ECN) platform. This implies that the platform provides a direct link to the Forex market. Dealing desk type of transaction does not apply here. The trading platform is designed by Spotware Systems Ltd. They are also the brain behind another ECN, cAlgo trading platform, a platform that permits algorithm trading on its cTrade platform.
cTrade is the best trading platform compared to MT4 and MT5 because it is very easy to use. Generally, proprietary trading software like cTrade is easier to use than the non-proprietary types.
IQ Broker Forex Proprietary Trading Platform
This is a trading platform provided by IQ Forex Trader. The big advantage of this platform is that you only bare risks with each trade and not the whole account balance you have, unlike most trading platforms, except when a proper stop-loss limit is implemented.
The ActTrade currency trading platform is built by ActForex Ltd. Both the layout and the manner in which orders are placed are different from how it is with MT4 and MT5. Though it may not be the best Forex platform out there but it comes in both the downloadable and the web-based versions. The ActFX programming language is used for this design.
Currenex is one of the rare trading platforms that are available in two versions. These are:
Currenex Viking platform: This is an ECN platform. It is more suited for professional traders because of its interface that appears more difficult to navigate.
Classic Currenex platform: This platform is a dealing desk platform that is run by using the market maker features. It comes with tools such as charts to make trading much easier, especially for beginners.
Classification Based on Trading Model
There are two major Forex trading models, the dealing desk trading model, and the No dealing desk trading model.
Forex trading platforms can also be divided into these two models.
Have in mind that dealing desk platforms are run by market makers. The trader must go through the dealing desk to execute an order. This means pricing will come from the dealing desk. Many popular platforms like the MetaTrader 4 and 5, TradeStation, Currenex Classic and ActTrade Platforms all come under the dealing desk category.
No Dealing Desk platforms use ECN model. Pricing is provided from many liquidity providers. You’ll see all the options from the liquidity providers displayed for you to make a pick to complete the trade. In other terms, it is also called direct access trading. Platforms such as cTrade, Currenex Viking and cAlgo all fall within this category. Institutional traders go with these trading platforms the most. Big traders with a large sum of money to trade with often use the NO Dealing desk platform. In most cases as well, deposit required for the No Dealing Desk brokerage account is much higher than for Dealing Desk accounts.
How to find Top-Rated Forex Brokers ?
Many types of Forex brokers exist including scam Forex brokers. This gives the reason it is important for adequate research to find the best Forex brokers to meet your needs. To be safe, it is always good to use only licensed and regulated Forex brokers with a good customer support for traders. Go through the official website hosting the country’s licensed and regulated companies to be sure the company is included in the list.
In your search, also look around to find good brokers that provide free demo accounts, a reliable trading platform and enables a minimum deposit.
What makes a Top-rated broker ?
Top rated Forex brokers are your best bet for a fruitful Forex trade experience. Since many of them adorn the market, you need to find a trustworthy and reliable one among the several ones in the market. If you’re ever going to find the best top rated broker, you should take a close look at some factors to finding one.
License and regulation
A regulated and licensed broker gives a good measure of security and safety for clients and especially beginners who are just starting out. A regulated broker is put under some measures by the government to safeguard the investment of traders. Special agencies created by the government of the country are responsible for setting those measures to regulate the activities of the Forex trading companies. For instance, Forex trading companies located in the UK, Australia, and the US are under the regulation of the Financial Conduct Authority (FCA), Australian Securities and Investment Commission (ASIC) and National Futures Association (NFA).
You’ll know a top-rated broker by his good reputation.
A reliable Forex broker should come with a good reputation. You can have a look at the image of the company by finding what people are saying about their performance. You can get a bit of this from the reviews provided by the existing customers. In most cases, a broker is owned and supported by an independent parent body. If the said parent company is known for negative activities, it is a pointer to stay off such a company. How long the company has been in business can be another good way to judge the reputation of the company. A company that has served for an extended period of time and has a good rating should be a good one that will be able to meet your trading goals.
Types of Trading Platform
All Forex brokers don’t run the same trading platforms. Since a very reliable trading platform is absolutely essential for a good trade, reputable brokers take this requirement very seriously. What type of trading platform do you already have in mind? If the broker employs unreliable or complex software, the chance is that many traders will avoid such brokers to find one that is most suitable to meet the needs. The MetaTrader versions and cTrader are some of the available platforms out there that many brokers have trust in and have in their system. Normally proprietary trading platforms are the most reliable like the cTrader software. A great user support is another important factor to consider on a broker’s platform. Consider many other options such as web-based or downloadable types of software if that meets your needs. Mobile trading and desktop trading platforms exist today as well. For a reputable broker, traders are treated to make choices by providing more than a single platform for traders to choose from.
Type of trading accounts
The best Forex broker that works to meet traders needs should offer a type of trading account that caters to a variety of traders. Not all individuals have the privilege of a huge capital to start a trade. The majority of Forex brokers therefore offer a variety of trading accounts to meet their clients' needs.
What is your financial capability and how much are you able to start a trade with? Many of the top-rated traders offer minimum deposit as low as $1 to begin a trade. A free demo account is also a good one to check in your choice of the best trading platform. You can compare account types of various Forex trading companies before deciding on which to choose for your transaction. Many mainstream Forex brokers may peg their minimum deposit to $100 or more. For ECN/STP Forex brokers, a higher minimum deposit may even apply.
Basically, there are the standard and the micro accounts with each having its leverage. Standard accounts usually have a lower leverage than a micro account. Expect to find the major Forex brokers provide a wide range of trading accounts for traders to choose from.
Traders should look out for the best trading features with a broker. The best brokers in the industry don’t ignore making their customers feel comfortable with the tools on the platform to enhance trading. Beginners will appreciate a trading platform that is user-friendly, has a market research feature, and a learning center including automated trading signals. On the second hand, expert traders will love a display of live streaming channels showing comprehensive market analysis, and latest news. Other features include feasible leverage, beneficial spreads, and ECN/STP account protocols. These and more are some vital features the top rated brokers offer to their clients. You’ll know a reliable broker by the quality of what he has to offer his traders in terms of features provided to enhance a good trading experience.
The number of financial instruments a broker provides is vital in Forex trading. The Forex market permits a trader many currency pairs. With over 150 currencies traded globally, the top-rated brokers make sure to cover many currencies on their platform. A good Forex broker provides access to a wide range of instruments including commodities, metals, CFDs besides the regular currencies to make up a good portfolio. Other financial assets such as bonds, stocks and indices may also be a good addition by some brokers. While many top rated brokers provide more than enough trading instruments for the clients, others provide limited numbers of trading instruments to avoid complexity. You can find out if any major instrument you intend to use is available with a broker before signing up with such.
Type of Trading Protocol Provided
The variety of trading protocols available with a broker can also be another way to know a quality-oriented broker that should be considered good.
A trading protocol is the connection mode between the market and the trader. These are either through the market makers or via the Direct Market Access (DMA). The market makers protocol uses the dealing desk trading platform to internally connect orders. This reduces liquidity in the market to a large extent and also raises a conflict of interest between the broker and his clients. The direct market access protocol provides direct access to the worldwide liquidity pool, a well-appreciated condition that has no conflict of interest between clients and the broker. This protocol is also known as the STP or ECN protocol. Many top rated brokers provide the two platforms while others stick with one. You should check to find out what a particular broker offers before signing up.
Steps on How To Find Top rated Brokers Online
There is a large pool of Forex brokers all across the globe. It won’t come that easy to find the best among them. Not every Forex broker will satisfy every requirements and preference of a trader. As a trader, you need to take steps to state clearly what your priorities are. This will help you to come out with a Forex broker to go for. If you already have your goals and knows what you’re looking for in a top-rated broker, here is how to find top rated brokers over the internet.
Reviews from Experts in the field
To get some useful insight about a particular Forex broker, a good place to start is by consulting the experts who have already traded on the platforms. Forex broker-focused reviews give details about the activities and performance of the broker over the years. Find real user reviews through forums and question and answer type of websites like Quora. Be mindful of some independent reviewers who are actually affiliated to the company involved. They will rather go on the positive side of the company since they are affiliates. Definitely, there are independent reviewers who are sincere just like we’ve always done over here.
The reviews help and give vital information about the trading platform, payment method including withdrawal efficiency, supported currency pairs, and trading protocol among others.
Get Advice from qualified family and friends
Experience counts a lot in any venture. This is why finding people in a social network that have gone the way you’re about going will save you getting hurt. People you know who already have some experience trading Forex will help a great deal to help you find a top-rated broker that will serve your need. Certainly, if they’ve been active in the market, they would have come across different brokers. Getting help from real people within your locality is a good way to continuously get advice regarding the efficiency of a particular broker until you’re convinced to go ahead with the broker. Professional advice just like independent reviews will enlighten you about the number of instruments, the trading platforms, and helpful software provided by the broker concerned. Remember to only look for qualified members of your relations and friends and not just anyone who has an idea.
Do Adequate Research Both Online and Offline
Carry out your own research about a broker. Individual research helps a great deal to get you settled on the Forex broker that is the best among the crop of brokers available online.
Your personal research will enable you to run a thorough evaluation of the various aspects of a proposed top-rated broker to properly find out things for yourself. These include also checking to find out about their reliability, efficiency, regulatory protection, and other features offered by the company. Be a part of a discussion group and join some Forex-focused forums to gain further insight into different Forex brokers available online.
You can create a list of most discussed Forex brokers and take them one after the other to go into more detailed research about them. Take views from experts and existing Forex traders. Visit the official website and see things for yourself to further extract more facts you need to know.
Open a Demo Trading Account to Test the Brokers
Opening a demo account to carry out a test is usually a safe way to test the effectiveness of a Forex broker before you choose to register a real account with the broker. If you choose to go with a live trade to truly see things for yourself, make sure to not deposit a large sum of money at this stage.
Though using a real account with real money may be a good one, a free demo account will also do to help you find that top-rated and reliable Forex broker. You should find virtually all top rated Forex brokers offering this feature. You’ll still need an official registration with a broker to use the demo account to carry out your test. A demo account allows you to trade as if you’re in a live market but you don’t lose or gain money in the process. You can run a demo account for the specified period it will last and make your conclusion afterward. Test as many demo accounts with different brokers as possible.
To make things easier for you, we have done the hard work for you through our Forex broker reviews and chosen some of the best brokers and listed them for your convenience as you follow the links below:
How to Trade Forex ?
Getting your hands on trading Forex can be exciting and thrilling. It can turn out to be a major interest you’ll love doing and as well serve as a rewarding source of income. There is huge money to be made in the large pool 0f $5 trillion that exchange hands daily in the Forex market.
To learn how to start Forex trading, your first move should be to find a reliable broker and register an account with the broker. Don’t be quick to start trading with real money. Open a free demo account instead to test out your trading abilities.
The trading process is a basic principle. You simply place a buy order when the price of a currency is likely to go up and you place a sell order when the price is likely to go down. Once you’re confident about your trading abilities with a demo, you can then go ahead and register with a live account and begin to trade.
As a beginner, here are the frequently used terms in the trading process that will be of help:
- In Forex trading, you’re buying a currency and selling another at the same time. The base currency is the one you are spending or selling while the quote currency is what you want to buy. For instance, in EUR/USD, the Eurozone stands in the position of the base currency while the dollar is in the position of the quote currency.
- A long position simply means you are buying a base currency and selling the quote currency.
- A short position then means you’re buying a quote currency and selling the base currency.
- A bid price is a price at which a broker is prepared to buy base currency in exchange for a quote currency.
- Ask price, otherwise called offer price is the price brokers will sell base currency in exchange for a quote currency. The ask price is also the best available price at the market that you’re willing to buy.
- The difference between the ask price and the bid price is called spread.
What To Know About Leverage in Forex ?
As a beginner who is about trading Forex for the first time, you might be wondering what the term leverage seems to imply. You have most likely come across figures such as 1000:1 leverage or 0.01 lots and the likes. If you haven’t, that shouldn’t be much trouble because it is all in line with what leverage is all about.
Simply put, a financial leverage in Forex is a way your account gets boosted to look more as if you were trading with a very large capital different from what your original account capital is. Forex brokers offer different types of leverage. This is usually in a ratio format as above. The leverage available to a trader is provided by the forex broker you’ve registered with and the size differs from broker to broker. With leverage in place, a Forex trader can place orders that are so large, even to about 1000 times what is in the original capital in the account. This way, a trader can trade larger volumes. With this large volume available for a trader to trade, a corresponding large profit can also be made if the trade happens to be positive. Likewise, if a negative result comes out, you’ll as well lose so much of funds easily too, carefulness is required.
A typical example of leverage is a trader with $500 available to trade. If there is 1000:1 leverage and he decides to go with it, he’ll be seen as trading with $500 x 1000 which is equal to $500, 000 instead of his $500 account balance. That is 1000 times the size of his $500.
Therefore, when trading with leverage, you’ll want to be careful to be on the safer side. A long position is best with a small leverage size. You can decide for a large leverage size if you’re going to open a position for a short period of time. Also, know that you’re not paying any interest on the leverage provided by your broker. You only need Forex swaps to transfer your position. This process can also be a profitable one for the trader. Many brokers offer competitive leverage to attract new subscribers and also encourage trading by existing traders.
Getting on with Trading Tips
To start trading, first, choose the currency pairs you want to trade with. Know that some currencies are more viable and active than others. A lot of factors determine why this is so. The economy of every country is different. This affects the currency as well. The more active a country is in commerce, export, and other fundamental factors, the more valuable will the currency be as well. Use tools to help you to trade right.
You can make some predictions about a particular economy. For instance, if you’re optimistic the United States economy will continue to grow, a good one for the dollar, your best move will be to buy dollars in exchange for another currency that the economy is likely to go down.
Remember that some factors such as politics and natural disasters can affect the performance of currencies. If a country is electing a new leader, for instance, the currency of that country can go up if the winner happens to have a favorable fiscal policy in place. A country can also push up the value of a currency when previously held strict regulations are relaxed.
The trading position of a country can raise the value of a currency if an export is encouraged. Check on the country’s trading position. If the country is very active in manufacturing and has many goods with high demands, there will be more export which consequently will lift the economy and as well result in appreciation of the currency value.
An economic report can help you take a decision on a currency to trade with. The country’s GDP reports and economic factors such as inflation and unemployment will influence the value of a currency. All these fall under the fundamental analysis of the country’s dealings.
Use Technical Indicators
Technical indicators bring many factors together to guide a Forex trader on which direction to go. You’ll find technical indicators in most trading platforms offered by brokers. They are inbuilt and provide charting functionalities to help trading Forex in a professional way. Technical analysts use these indicators to help them to properly trade on the Forex market. They are also used by the analysts to generate trading signals which are helpful especially to traders who are just starting out with Forex trading.
Use Sentimental Analysis
Besides fundamental analysis, sentimental analysis can be employed to get some idea on the direction the market is likely to go. Here, you try analyzing the mood of the market to find out whether it is bullish or bearish. While sentimental analysis may not totally be recommended as a very good option at analysis, it can give a direction to influence trading decisions.
Know How Profit is Calculated
You should know how many pips you gained or lose after a trade. A pip is calculated by finding the difference in the values of the currency traded. For example, if a USD/JPY moves from 1.0000 to 1.0020, the currency value has gone up by 20 pips.
To know what your profit or loss is, find the product between the exchange rate and the pip value. This will give you exactly what you’ve earned in the trade. An exchange rate is an amount you’ll need to spend on quote currency to buy base currency.
How to deposit and withdraw funds from a broker
The real deal about any business is the money aspect. If you cannot take control and move your funds freely when you need to, you may consider not venturing into such transactions.
One of the most important factors that are considered for choosing a good Forex broker is the ease and convenience of depositing and withdrawing your funds from your account with the broker. Efficiency, security, and reliability are major factors that are looked at in a broker’s payment method before deciding to sign up for an account with the broker.
A non-functional payment method will not only affect the broker’s reputation but also your investment and trading.
Since you’ll need to have an initial deposit with a broker before commencing a trade in the Forex market, every top-rated Forex broker makes sure to provide reliable payment options for their numerous customers.
Depositing to your Trading Account
To start trading with a broker, you need to deposit a minimum amount which stands much like collateral for you with the broker. Making deposit is the process of sending your money over to your trading account with a broker. The minimum amount required differs depending on individual brokers. New traders are more comfortable with low deposits and this happens to be available with most Forex brokers these days. You can find as low as $1 to $5 in some cases as a minimum deposit to begin trading Forex with a broker. Depositing funds to your trading account comes with no much limitation such as when to deposit and how often you can do it in the week or within the month.
Forex brokers sometimes provide bonuses for their traders. In some cases, it can be a welcome bonus for new subscribers, a deposit bonus and at some other time, for active traders on the platform. Some bonuses are given after participation and completion of a trade. This is known as rebates. Other bonuses may require you to fulfill a fixed number of trades before it is credited.
You can actually withdraw a deposit bonus when you meet up with the withdrawal requirements. Usually, you’ll need to make a Forex bonus deposit which may take some period of time before it reflects on your account. Once there, the trader may need to start entering and closing trades to meet up with the required volume of trade for the bonus to be released and claimed as the trader’s fund. He can choose to withdraw it or use it in future trades.
Beware that some scams are out there with too good to be true bonuses. You’ll want to avoid them because they are there to trick you into making deposit and thereafter compelling you to make some risky trades.
Withdrawal from your trading account
In contrast to depositing funds to your account with a broker, a withdrawal doesn’t come that freely. There are some restrictions. By withdrawal, it means taking out the money in your trading account with the broker back to your local account. This money also includes profits, deposits, and bonuses you have in your trading account.
Have in mind that all brokers are not the same. They have equally different withdrawal requirements as well. There are limitations to the total amount that can be withdrawn in a day or month as the case applies. You’ll often find the minimum at which you can withdraw from your account and the maximum you can also do the same. You also have the restrictions on how often you can make withdrawals. Some brokers have specified periods for withdrawals. It can be weekly, fortnightly or once in the month. Fees can be charged too for these withdrawals depending on the broker you are dealing with. Many top-rated brokers wave this aspect and do not charge their customers commissions or fees to make payments.
A basic withdrawal or deposit procedure is an easy one that anybody can seamlessly carry out.
- First, decide the amount you want to withdraw or deposit.
- Depending on the broker’s platform design, click on the deposit or withdraw button.
- Enter the amount you want to withdraw or deposit and place your request accordingly. If it’s deposit, you may be required to input your payment processor account details. Your withdrawal should go to an already linked account for that purpose.
- You may be asked to confirm your request with a link sent to your email address or a code sent to your telephone number to complete the process.
To carry out a deposit or withdrawal, traders use a payment channel they are more comfortable with. The more the options provided by the broker for this, the better it is for the trader to choose one that suits him best.
Many payment methods are provided by brokers on their platforms. The traditional credit or debit card and wire transfer still remain as the most favored option by many brokers. However, with increasing use of e-wallets and electronic payment options, brokers have included a wide range of payment options to cover these channels. Top brokers in the industry are beginning to see the benefits of incorporating online payment processors for making payments on their platforms.
Skrill, Neteller, WebMoney, Bitcoins, Visa/Master card and direct deposit are provided by most brokers. Payment options like Paypal are supported by some brokers in the industry like Pepperstone and ICMarkets.
The whole idea is providing a variety of payment options for all categories of traders to meet their needs. Now, if you can successfully deposit funds into your trading account but find it a very difficult task or something almost impossible to process a withdrawal, know that you already have a good signal to avoid such broker.
Forex Currency trading Signals
You probably have heard about Forex trading signals at the time you decided taking up Forex trading as a beginner. It is important to learn the ropes trading all by yourself by using a demo account and later going over to a live account for the real live trading.
To be effective in Forex trading, you need to have a good grasp of what currency trading signals are and why you need them to be efficient with your trading. You also need to know who the signal providers are and how finding a good and reliable provider is vital to your trading success.
What are currency trading signals ?
Currency trading signals are simple alerts to notify a trader on when to enter and close a trade in a currency market. Signals are sourced much from current events affecting a particular currency at the time. Expert traders use trading signals most often. It is not enough to just place an order without knowing what is happening at the time about the currency at hand, it will be more like gambling in that case.
Categories of Currency Signals
Significantly, currency signals can be grouped into three categories:
Current News Signals
When dealing with fundamental analysis, news feeds are very important to tell the direction of the market for the various currencies. The purpose of this signal is to quickly have access to the news release as fast as possible. This helps a trader to get the maximum benefit from making some profit within a short period of time. The signal is accompanied with weekly or daily analysis or commentary. Most trading platforms supplies quality news feeds from various market information sources such as Bloomberg, Association Press, and Reuters. Find out whether the news provided by your trading platform is the type you desire.
Technical signals concerns using technical analysis to help your Forex trading. This is the most used type of signal during a currency trade. If you’re getting such signals from a provider, you’re more or less putting your trust in the ability of the signal provider. Therefore, you should only go for the services of proven signal providers that have the track records backing them up. To cut losses, technical signals often come with various risk management strategies such as when to enter and the period or value change when to exit the market. This will minimize losses in the event that the expected result fails.
The last category of currency signals comes from real-time trading ideas. This can be through webinars and other educational sources.
Forex Signal Providers
Getting yourself well educated about Forex signals is needful to help you find the best Forex trading signal provider out there.
Forex trading signals are provided for traders by most top-rated brokers on their trading platforms. Secondly, they can be sourced from companies that specialize in providing Forex trading signals. This goes to show that both paid and free Forex trading methods exists including scams. It is advisable to use a reliable paid Forex trading signals service provider like franco signals, bobs forex signals or go with free currency trading signal sites like babypips or tradingview. At Pegima, we recommend them both and it is always better to trade on your own using your Forex trading strategies. This will help you to learn the ropes and trade at any time without depending on others.
Prices vary and it is not always on the low side when looking for proficient Forex trading signal providers. Some top brokers may provide the service free of charge but others may charge as much as $10 a day or even more depend on the broker. A one-time subscription package may be a good one and can be in the hundred-dollar range for some providers. Whatever the cost, paid trading signal providers are more reliable for trading Forex professionally.
Services Enjoyed from Currency Trading Signal Providers
Services provided by paid trading signal service providers differ from company to company. They provide various alert options to notify their subscribers. Be sure to have many channels providing you with the needed information to help your currency trading. This covers performance trackers, to emails, SMS alerts and custom support that may include phone calls and advanced analysis.
You should, however, beware of scams such as those offering you a success rate that seems too good to be true. A reliable Forex trading signal service provider should have information and proofs to back up his claims to be seen as one of the best signal providers.
There is a good reason why you may need Forex trading signals to help your trading success. Using Forex signals for your trade also depends on you. For example, if you’re the busy type and rarely have sufficient time to carry out adequate analysis yourself about the market, Forex trading signals come in handy to save some time. Forex trading signal helps you to go fast with your trading especially if you doing manual trading.
Education is key to having a good Forex trading experience. You should know what works and what doesn’t. A good strategy and how to implement it doesn’t just come like that, you have to learn and work at it. You can be the best you want to be with Forex trading with the best Forex School available to watch back. At Pegima we provide all you need to get fully educated on the Forex subject. You can use our trading school to learn and trade Forex easily and become an effective trader with time. Whatever the level you are in, our resources are simplified to teach even the basics of Forex trading for dummies and as well help the expert reach his goal.
Why Forex Education is Vital ?
You take away a lot of benefits from learning Forex when you find a good Forex school to hold you by the hand.
- You’re taken through the basics
- It increases your chances of success with Forex trading
- It helps you to make out your own trading plan
- You can find a mentor to be your guide
- You’ll enjoy the rewards
Forex Trading Educational Materials
Forex Trading Reviews by Country
General Risk Warning : Trading financial products carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose.