Since forex trading is primarily exchanging one currency for another, currencies in the forex market are traded in pairs. The currency pair is a quotation for one currency against the other; known as quote currency and base currency. Currency pairs are affected by different fundamental and technical factors that affect the exchange rate. These factors include economic policies, political stability, trade flows, and of course the changes in supply and demand.

Currency pairs use the abbreviation of currency and country names. Understanding the pricing and quotation for currency pairs is very essential in forex trading. Currencies are defined as the base currency and secondary quote currency. The base currency is the first currency in a currency pair. Also known as the transaction currency. The quote currency is the currency being used to pay for the transaction, and it is also known as the counter currency or secondary currency.

This explains why currencies are traded in pairs. If the price of the pair is 1. The eight most traded currencies in the forex market are the US dollar USD , the euro EUR , the British pound GBP , the Japanese yen JPY , the Canadian dollar CAD , the Australian dollar AUD , the Swiss franc CHF , and the Chinese Yuan CNY , according to the BIS survey in Forex trading is based essentially on the idea of anticipating the future price of the currencies.

To predict future market directions, traders use two main types of analysis to predict market movements. These are technical analysis and fundamental analysis. As a forex trader, you can rely on one or both of them to predict the market. Technical analysis is based on the study of historical price action in order to identify price patterns and predict the future movements in the forex market through the use of technical indicators and historic price patterns.

The main tool for technical analysis is the price chart through which traders interpret price patterns. That is why it is widely seen by novice traders as an easier approach to analyze the market.

Learning the basics of forex technical analysis and tools can be sufficient to start trading. Once you understand the main concepts of technical analysis, you can apply them to any market, which makes it a flexible analytical tool. Check more about Forex Charts and how to read them. Fundamental analysis , on the other hand, is evaluating the price of a currency and assessing the factors that could influence its value in the future, including external influences, as well as financial statements and economic trends.

While fundamental analysis analyzes the fundamental and economic factors, technical analysis tends to identify price trends, which conveniently can be caused by the underlying fundamentals. The Forex broker is an intermediary entity between retail traders and the forex market or the interbank system, in which major banks trade with each other. The broker provides financial services to facilitate the process of buying and selling foreign currencies for retail traders.

Clients of a forex broker may also include large financial institutions that trade on behalf of retail customers and investment banks. Take your time searching for a reliable forex broker so your money and trades will be handled appropriately.

The main features of a reliable broker include efficient customer support, real-time market execution, suitable trading conditions, a wide selection of account types that suits different traders depending on their financial capabilities, providing advanced software for successful trading, secure and fast money depositing and withdrawal, competitive spreads and finally but not least is offering multiple trading options with various currency pairs. You have to choose a regulated forex broker, which keeps you safe from scams and frauds.

AximTrade Regulation guarantees accountability and transparency that protects the interests of our traders. Nowadays, advanced trading platforms have transformed the overall trading process, making it easier and more accessible. AximTrade, recognized as the best broker, offers its award-winning Metatrader 4 MT4 trading platform for an outstanding trading experience. MetaTrader 4 has a very user-friendly interface, which enables new and experienced traders to trade with ease and comfort.

Traders of all levels find this Forex platform easy to use. You can download the MT4 platform for your home computer, tablet, and phone. The MetaTrader 4 platform offers real-time access to market prices and liquidity. Traders are able to view all details including spread, contract size, margin currency, and margin percentage. MT4 provides extensive tools for price analysis with a set of in-built technical indicators and charting tools. Know how to Download AximTrade MetaTrader 4.

There are many ways to learn forex trading, they can either be free or paid. Forex trading is based on the ability to understand trends and spotting opportunities in the market. Therefore, the main step to learn forex trading is to believe in self-education and to be patient with your progress. Staying up to date with the key forex terms and what they really mean is very helpful.

The MetaTrader 4 MT4 platform is often considered as one of the most intuitive and easy to use forex trading platforms which makes it a popular choice amongst new forex traders across the globe. You will find that there are lots of MetaTrader brokers which is one of the most user-friendly platforms that gives convenient market access for manual and automated trading strategies.

Most forex brokers will provide traders with free forex trading platforms although there are some who charge monthly and volume-based fees, usually for specialised trading platforms that have specific features a professional forex investor may need. That being said, the free platforms will most likely be sufficient enough for the average retail trader. In addition to potential fees for gaining access to the brokers trading platforms, you should consider other online forex trading costs.

Most forex brokerages will charge a commission for placing trades in addition to the spread and overnight swap fee. These costs can vary significantly from broker to broker so it is important to consider the overall costs you will incur and the affect that will have on your money management.

All forex trading platforms come with a range of free built in trading tools to assist with your forex trading, helping to improve overall efficiency and performance. These can include technical indicators for analysing charts such as a moving average, MACD, Bollinger Bands, RSI, CCI and many more.

Some forex platforms offer fundamental analysis tools such as built in economic calendars to efficiently keep track of the latest forex news releases. They may also have trading calculators to help with planning your trades. If you require a specific set of trading tools or would like access to as many as possible, you should check what forex trading platforms the broker offers along with the trading tools included. Some trading tools are stand alone and thus will not be incorporated into the platforms but can still be very useful.

Forex is one of the most popular markets for online traders and is a large focus of the service that trading brokers offer. Each forex broker will offer a range of different markets and trading instruments to trade via their online trading platforms. If you wish to trade a particular asset class such as forex, stocks, cryptos, etc, you should check whether the broker offers that market through its platforms.

It may also be wise to consider if you plan to diversify your investment portfolio in the future. If so, the more trading products and markets offered by the broker, the easier it could be to expand your portfolio when the time is right. You will want to check that the forex broker offers a good range of forex currency pairs for trading, this will include major currency pairs such as the EURUSD and GBPUSD, minor currency pairs such as the EURGBP and EURAUD, exotic currency pairs such as the EURTRY and USDDKK.

The more currency pairs available, the greater your options will be. You will find there are many brokers who offer a combination of financial instruments. A forex broker makes money by charging a fee for using their services.

These brokers charge zero commission but will increase the liquidity providers spreads to cover costs and make profit from every trade processed through them. They can offer fixed spread accounts which is not always a sustainable model as actual spreads may be greater than the fixed spread set by a broker. When a broker charges a commission they tend to offer variable spreads which will depend on the liquidity pools that they use, without any mark-up. This will often mean lower spreads and overall trading costs, even after the discount brokers commission fee is factored in.

When you trade forex online with a forex broker, you may be charged a commission fee for each trade. Generally speaking, the lower the commission fee, the more you can save on trading costs in the long-term. If you are someone who plans on placing trades on a frequent basis, then you may wish to shop around for a discount broker.

Some brokers do not charge a commission but will usually compensate by including a spread mark-up to cover costs. The type of broker you choose can depend on your trading style. Those who use scalping strategies may look for brokers with the lowest commission and spreads possible.

However, swing traders who hold positions over the long-term, are less likely to be as concerned by the commissions and spreads. Most forex brokers will charge a commission for each trade that you place. It would be a wise idea to factor the commission in to your money management plan as it is a key trading cost, along with the spread. Some brokers offer fixed and variable spread accounts, some will offer commission free accounts but instead mark up the spread to make up for this.

In general, the more liquidity that the broker has, the tighter the spreads can be. It is important to account for the spread when planning your forex trading strategy, especially if you are planning on using scalping strategy. Every time you buy or sell a currency pair, you need to pay the spread.

This is the difference between the buy and sell price. Whilst the spread will be similar across most brokers, some forex brokers have more liquidity providers LPs than others which means their spreads can be lower.

This is especially important if you are taking short term trades as the spread can quickly add up. If you hold a position with your online forex broker overnight then you will probably need to pay a swap fee. This is an interest fee for the procedure of moving open positions from one day to another, also known as the rollover. Weekend rollover is usually charged on Wednesday which will give a credit or debit of triple the normal amount.

This is another cost to factor in to your money management planning. Some brokers offer swap free Islamic trading accounts that conform with Sharia law which allows Muslims to engage in online trading through their forex platforms.

Along with trading platform, spread, commission and swap fees, most forex brokers will charge additional fees that should be checked and clearly understood.

Other fees that are worth considering include withdrawal and inactivity fees. Forex is a margined product, also known as leveraged trading. Leverage involves borrowing a certain amount of the money needed to invest in something. In the case of forex trading, money is usually borrowed from a forex broker.

Forex trading does offer high leverage in the sense that for an initial margin requirement, a trader can leverage their account in order to control a much larger position size. Nearly all online brokers offer leveraged forex trading via their platforms. Leverage basically means that you can open a position larger than you could without it.

Some forex brokers can provide leverage of up to or even higher in certain jurisdictions. Although leverage can increase profit potential, it also increases trading risk and thus, can lead to large losses. It is imperative that you have a thorough understanding of leverage and the significant risks involved before you start trading online.

Check the broker offers a leverage that you require via your preferred forex trading platform. Trailing stops and break evens are other options they can allow. Some brokers will have a minimum distance requirement if you try to modify an order at a level to close to the current price.

Most brokers will allow scalpers, hedging and automated trading. It is worth considering what order types you plan to use and if these are supported by the broker. The forex market is traded in lots which can be micro, mini or standard. Check to make sure the broker supports the lot size that you wish to trade.

Many new traders start with micro lots to get a feeling for trading in a real environment with less risk. You can trade single or multiple lots, e.

six micro lots 0. Some brokers also provide traders with educational resources such as videos and trading guides to help them improve their forex trading knowledge and skills. They may include detailed tutorials on how to use trading platforms which could be helpful for those who are new to online trading and need help to familiarise themselves with the different platforms available to them. If you require specific tools or would find them beneficial, check that they are offered to clients of the broker and if they free or come at an additional cost.

If you are new to trading and need as much guidance as possible, you might want to explore our best brokers for beginners. Each online forex broker will offer different options for making deposits and withdrawals to and from the trading platform. Ensure that the trading platform supports your preferred method for funding your forex account.

Whatever the skill level of a trader, it is very likely at some point you will need to contact customer service. This may be more frequent for beginners or a one off for the more experienced traders. However, the customer service should respond in a prompt and efficient manner. Consider what customer services they offer as one may be more convenient to you than others.

Some traders prefer to communicate over live chat whereas others want to speak to someone directly on the phone. Online chat is often the quickest way to speak with someone. Also consider the location of the forex broker as the time difference may cause difficulties although most brokers should offer multilingual support 24 hours a day, five days a week.

The more hours the forex brokerage support team is available, the better. You will need to make sure that the forex trading platform will run on your computer, VPS or mobile device by checking the specification requirements. Each forex broker trading platform will have a minimum deposit requirement which is worth considering. Now that you have had a brief overview of what forex trading platforms are and what to look for, you may be considering opening a forex trading account with an online broker to gain access to their trading platforms.

This can be a quick and easy process that requires completing an online registration form. Simply choose a broker, follow the account opening process and you will be able to start trading online through one of their trading platforms. If you have taken the time to read through the above, you should hopefully have an understanding of the forex market and how to trade forex online.

Here is a summary of the key steps summarised:. Trading forex online requires investing time and money. It also carries an element of risk, especially when trading with leverage. You will need to research and analyse currency pairs, follow market news and manage your forex trades. It is important to understand the risks and dedication that comes with trading forex online. Before trading forex, it is important to learn as much as possible about the forex market.

This way you can be prepared as any mistake could prove to be costly. There is a vast array of free educational materials provided by many forex brokers that can help you to improve your trading skills and knowledge. Most brokerages will also provide a free demo trading account so that you can practice trading forex online with virtual funds in order to familiarise yourself with the trading platforms and practice your forex strategies until you feel confident enough to open a real trading account.

In order to trade forex online, you will need a broker account and forex trading platform to execute your trade positions through to the forex market. When choosing a broker, there are a few important things to consider such as regulation, commission fees, platforms, tools, education, funding options and customer support.

If you have made it this far then you may be ready to start trading forex online! The next step is to research the different forex currency pairs to discover which currencies you have an interest in. You can choose from major minor and exotic currency pairs. Some experts suggest mastering one currency pair rather than trying to follow multiple currencies with different characteristics. Amongst the most important factors that can help determine forex trading results can be the trading plan and discipline.

It is important to have a solid trading plan personalised to your own needs that includes the money management and trading strategy that you will use. Most experts and professional traders would try to not let negative emotions such as fear, anger and greed affect their forex trading. Once you know what forex currency pairs you want to trade online, you can analyse them to help decide if and when you will place your trades.

After placing a forex trade, you will need to keep track of how it performs and manage it according to your forex trading plan. Some traders will keep hold of currencies for the long-term, whereas others may buy and sell currency pairs on a daily basis.

Forex trading is a popular choice for active investors who would like to trade a market that is open 24 hours a day. The liquidity of the forex market also means that there is ample opportunity to look for trades.

It can be suitable for scalping, day trading and swing trading. However, it is important to understand the significant risks involved with trading forex online, especially when using leveraged positions. Most experts would suggest trading on a demo account with virtual funds to begin with.

This can be a useful way to familiarise yourself with how to trade forex and use the trading platforms whilst allowing you to practice your trading strategies until you feel confident and produce consistent results. Most forex brokers provide unlimited demo accounts free of charge. Forex trading requires patience, discipline and lots of practice. According to our research across hundreds of forex brokers, most online forex traders actually lose money.

Most aspiring traders start trading on a demo trading account before going live. Take your time to research brokers and do your own due diligence, the above information is only for educational purposes and not advice.

Please feel free to view our best forex brokers if you need some further inspiration before you get started.

Richard Montana Richard has many years of experience in broker research, testing, analysis and reviews. He knows what to look for through years of trading himself with different brokers and listening to the feedback of others.

For all of our broker reviews, we research, validate, analyse and compare what we deem to be the most important factors to consider when choosing a broker.

This includes pros, cons and an overall rating based on our findings. We aim to help you find the best broker according to your own needs. You can read more about our review process. Forex trading in the United Arab Emirates is very popular, with many forex brokers accepting….

Buying and selling currencies is popular amongst residents of Singapore who are looking to speculate…. Forex trading is very popular in Indonesia. Whilst using a broker regulated by the Financial…. Currency trading is popular in France, especially for those who want to speculate on falling….

Home Guides Forex Trading Guide. Forex Trading Guide Richard Montana October 21, What is the Forex Market? Forex Market Differences The forex market is different from other major markets. What is Forex Trading? What are Forex Currency Pairs? Major currency pairs These are the most liquid currencies and most actively traded. Minor currency pairs Minor currency pairs are not as popular and therefore not traded as much as the major currencies.

Exotic currency pairs Exotic currency pairs are very rarely traded. How does Forex Trading Work? How to Analyse the Forex Market? Forex technical analysis Forex technical analysis involves using a combination of technical indicators on forex charts to try and identify the direction in which a currency pair will move.

Forex fundamental analysis Fundamental analysis in the forex market is the analysis of economic factors that can affect currency pairs.

Forex price action analysis Price action analysis when trading forex is the study of price to assist with trading decisions. Forex sentiment analysis Forex sentiment analysis involves looking at what other market participants are doing and using this information to assist in trading decisions.

What is a Forex Broker? Market Makers There are forex brokers who operate as a market maker and use a dealing desk. What is a Forex Trading Platform? Choosing a Forex Broker We will now look at what forex trading platforms are used for and some of the most important factors to consider when looking for a reliable forex platform. The key factors to consider when choosing an online forex broker include: Regulation When you choose a forex trading platform it is very important to ensure that the forex brokerage providing the platform is regulated by a respected government authority.

Platforms If you are already familiar with a specific forex trading platform then it could be a good idea to choose a forex broker that offers that platform. Tools All forex trading platforms come with a range of free built in trading tools to assist with your forex trading, helping to improve overall efficiency and performance.

Currency Pairs Forex is one of the most popular markets for online traders and is a large focus of the service that trading brokers offer.

Broker Fees A forex broker makes money by charging a fee for using their services. Commissions When you trade forex online with a forex broker, you may be charged a commission fee for each trade. Swaps If you hold a position with your online forex broker overnight then you will probably need to pay a swap fee.

Forex FX is a portmanteau of foreign currency and exchange. Foreign exchange is the process of changing one currency into another for a variety of reasons, usually for commerce, trading, or tourism.

Trading currencies can be risky and complex. Because there are such large trade flows within the system, it is difficult for rogue traders to influence the price of a currency. This system helps create transparency in the market for investors with access to interbank dealing.

Retail investors should spend time learning about the forex market and then researching which forex broker to sign up with, and find out whether it is regulated in the United States or the United Kingdom U. and U. dealers have more oversight or in a country with more lax rules and oversight.

It is also a good idea to find out what kind of account protections are available in case of a market crisis, or if a dealer becomes insolvent.

Read on to learn about the forex markets, what it's used for, and how you can get started trading. The foreign exchange market is where currencies are traded. Currencies are important because they allow us to purchase goods and services locally and across borders. International currencies need to be exchanged to conduct foreign trade and business. If you are living in the United States and want to buy cheese from France, then either you or the company from which you buy the cheese has to pay the French for the cheese in euros EUR.

This means that the U. importer would have to exchange the equivalent value of U. dollars USD for euros. The same goes for traveling. The tourist has to exchange the euros for the local currency, in this case the Egyptian pound, at the current exchange rate. One unique aspect of this international market is that there is no central marketplace for foreign exchange.

Rather, currency trading is conducted electronically over the counter OTC , which means that all transactions occur via computer networks among traders around the world, rather than on one centralized exchange. The market is open 24 hours a day, five and a half days a week, and currencies are traded worldwide in the major financial centers of Frankfurt, Hong Kong, London, New York, Paris, Singapore, Sydney, Tokyo, and Zurich—across almost every time zone.

This means that when the U. trading day ends, the forex market begins anew in Tokyo and Hong Kong. As such, the forex market can be extremely active anytime, with price quotes changing constantly. These terms are synonymous and all refer to the forex market.

In its most basic sense, the forex market has been around for centuries. People have always exchanged or bartered goods and currencies to purchase goods and services. However, the forex market, as we understand it today, is a relatively modern invention.

After the Bretton Woods accord began to collapse in , more currencies were allowed to float freely against one another. The values of individual currencies vary based on demand and circulation and are monitored by foreign exchange trading services. Commercial and investment banks conduct most of the trading in forex markets on behalf of their clients, but there are also speculative opportunities for trading one currency against another for professional and individual investors.

There are two distinct features of currencies as an asset class :. An investor can profit from the difference between two interest rates in two different economies by buying the currency with the higher interest rate and shorting the currency with the lower interest rate. Prior to the financial crisis, it was very common to short the Japanese yen JPY and buy British pounds GBP because the interest rate differential was very large. This strategy is sometimes referred to as a carry trade.

Currency trading was very difficult for individual investors prior to the Internet. Most currency traders were large multinational corporations , hedge funds , or high-net-worth individuals HNWIs because forex trading required a lot of capital.

With help from the Internet, a retail market aimed at individual traders has emerged, providing easy access to the foreign exchange markets through either the banks themselves or brokers making a secondary market. Most online brokers or dealers offer very high leverage to individual traders who can control a large trade with a small account balance. The FX market is where currencies are traded. It is the only truly continuous and nonstop trading market in the world.

In the past, the forex market was dominated by institutional firms and large banks, which acted on behalf of clients. But it has become more retail-oriented in recent years, and traders and investors of many holding sizes have begun participating in it. An interesting aspect of world forex markets is that there are no physical buildings that function as trading venues for the markets. Instead, it is a series of connections made through trading terminals and computer networks.

Participants in this market are institutions, investment banks, commercial banks, and retail investors. The foreign exchange market is considered more opaque than other financial markets.

Currencies are traded in OTC markets, where disclosures are not mandatory. Large liquidity pools from institutional firms are a prevalent feature of the market. A survey found that the motives of large financial institutions played the most important role in determining currency prices. Forex is traded primarily via three venues: spot markets, forwards markets, and futures markets. When people refer to the forex market, they are thus usually referring to the spot market.

The forwards and futures markets tend to be more popular with companies or financial firms that need to hedge their foreign exchange risks out to a specific date in the future. Forex trading in the spot market has always been the largest because it trades in the biggest underlying real asset for the forwards and futures markets. Previously, volumes in the forwards and futures markets surpassed those of the spot markets. However, the trading volumes for forex spot markets received a boost with the advent of electronic trading and the proliferation of forex brokers.

The spot market is where currencies are bought and sold based on their trading price. That price is determined by supply and demand and is calculated based on several factors, including current interest rates, economic performance, sentiment toward ongoing political situations both locally and internationally , and the perception of the future performance of one currency against another.

A finalized deal is known as a spot deal. It is a bilateral transaction in which one party delivers an agreed-upon currency amount to the counterparty and receives a specified amount of another currency at the agreed-upon exchange rate value. After a position is closed, the settlement is in cash. Although the spot market is commonly known as one that deals with transactions in the present rather than in the future , these trades actually take two days for settlement.

A forward contract is a private agreement between two parties to buy a currency at a future date and at a predetermined price in the OTC markets. A futures contract is a standardized agreement between two parties to take delivery of a currency at a future date and at a predetermined price.

Futures trade on exchanges and not OTC. In the forwards market, contracts are bought and sold OTC between two parties, who determine the terms of the agreement between themselves. In the futures market, futures contracts are bought and sold based upon a standard size and settlement date on public commodities markets, such as the Chicago Mercantile Exchange CME.

In the United States, the National Futures Association NFA regulates the futures market. Futures contracts have specific details, including the number of units being traded, delivery and settlement dates, and minimum price increments that cannot be customized. The exchange acts as a counterparty to the trader, providing clearance and settlement services.

Both types of contracts are binding and are typically settled for cash at the exchange in question upon expiry, although contracts can also be bought and sold before they expire. The currency forwards and futures markets can offer protection against risk when trading currencies.

Usually, big international corporations use these markets to hedge against future exchange rate fluctuations, but speculators take part in these markets as well.

In addition to forwards and futures, options contracts are also traded on certain currency pairs. Forex options give holders the right, but not the obligation, to enter into a forex trade at a future date and for a pre-set exchange rate, before the option expires.

Unlike the spot market, the forwards, futures, and options markets do not trade actual currencies. Instead, they deal in contracts that represent claims to a certain currency type, a specific price per unit, and a future date for settlement. This is why they are known as derivatives markets. Companies doing business in foreign countries are at risk due to fluctuations in currency values when they buy or sell goods and services outside of their domestic market.

Foreign exchange markets provide a way to hedge currency risk by fixing a rate at which the transaction will be completed. To accomplish this, a trader can buy or sell currencies in the forward or swap markets in advance, which locks in an exchange rate.

For example, imagine that a company plans to sell U. Unfortunately, the U. dollar begins to rise in value vs. A stronger dollar resulted in a much smaller profit than expected.

The blender company could have reduced this risk by short selling the euro and buying the U. dollar when they were at parity. That way, if the U. dollar rose in value, then the profits from the trade would offset the reduced profit from the sale of blenders. If the U. dollar fell in value, then the more favorable exchange rate would increase the profit from the sale of blenders, which offsets the losses in the trade.

Hedging of this kind can be done in the currency futures market. The advantage for the trader is that futures contracts are standardized and cleared by a central authority. However, currency futures may be less liquid than the forwards markets, which are decentralized and exist within the interbank system throughout the world.

Factors like interest rates , trade flows, tourism, economic strength, and geopolitical risk affect the supply and demand for currencies, creating daily volatility in the forex markets.

A forecast that one currency will weaken is essentially the same as assuming that the other currency in the pair will strengthen because currencies are traded as pairs. The trader believes higher U. If the investor had shorted the AUD and went long on the USD, then they would have profited from the change in value.

Currency prices fluctuate constantly against each other, which presents multiple trading opportunities on a daily basis. This is particularly the case for long-term investments, including investments in bonds or stocks, where traders rely solely on the value of their assets increasing in value. Traders must therefore understand time zones. Forex markets lack instruments that provide regular income, such as regular dividend payments, which might make them attractive to investors who are not interested in exponential returns. While FOREX. Each online forex broker will offer different options for making deposits and withdrawals to and from the trading platform. Foreign exchange trading will have both a bid and ask price.

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