The euro and the US dollar are by far the most important currencies on the international foreign exchange market. A quarter of all trades made on the global financial market are based on this currency pair. The trading volume of these two currencies is unlikely to change in the future, as they are too important for international currency and economic trading.
| # | Top 10 Brokers | Best For | Minimum Deposit |
|---|---|---|---|
| 1 | Pepperstone | Tight Spreads | $200 |
| 2 | IQ Option | Beginners | $10 (EEA $50) |
| 3 | eToro | Copy Trading | $200 |
| 4 | FXTM | Leverage Trading | $10 |
| 5 | XM | Min. Deposit | $5 |
| 6 | AvaTrade | Fixed Spreads | $100 |
| 7 | RoboForex | High Leverage | $10 |
| 8 | IG Markets | Number of Assets | $300 |
| 9 | BDSWISS | User Friendly Trading | $100 |
| 10 | Forex.com | Great Liquidity | $50 |
What is meant by a Forex broker?
The operation and work of a Forex broker can be compared to a direct bank. Private investors usually cannot trade currencies themselves, but have to conduct these transactions through a service provider specializing in currency trading.
At this point, the forex broker enters the stage of currency trading. He is responsible for giving private investors access to the international foreign exchange market after opening a Forex account. With his service, the Forex broker provides the private investors with the trading platform for the settlement of their Forex trade. Nowadays, forex trading through forex brokers is mostly commission-free. Forex brokers act on behalf of their clients in the foreign exchange market and draw their profits through the spreads. Both credit institutions and independent service providers can be considered as Forex brokers.
On the Internet, interested investors can find a large number of forex brokers with an in-house platform that allows them to trade easily, quickly and intuitively. The investor registers with the broker of his choice, deposits a minimum amount into his previously opened account and immediately enters into forex trading. Those who do not feel confident in trading Forex on their own can also use the services offered by their local bank. However, regular commercial banks often offer these Forex services only to well-off or institutional clients.
- Interested investors can now also take advantage of the forex services offered by many direct banks.
- Forex brokers are becoming more and more important for the currency market, as more and more investors are interested in this segment of the financial market.
- For private and small investors, Forex brokers are often the only way to access the financial market.
What is meant by the opening and closing rates?
Forex trading via the Internet allows market participants to trade around the clock. Nevertheless, there are fixed trading hours. During this time period, price developments are continuously documented. During these main trading hours, the individual currency rates usually change more than during the off-peak trading hours. Germany and Europe trade from 8:00 a.m. to 6:00 p.m. on business days. The start of trading hours represents the opening rate of a currency. In the USA, traders trade in the period from 14:00 to 21:00. In Asia, trades are settled in the period from 1:00 a.m. to 10:00 a.m. in the morning. The closing price is the same as the opening price and is recorded at the end of the trading day.
How do traders recognize a good Forex broker?
A reputable Forex broker sees itself as a service provider and partner to its clients. Forex brokers provide their clients with the technical framework to realize their trades through their trading platform. With their technical platform, they import various chart models and trading signals, but do not act personally in currency trading.
- For this reason, most trading platforms on the Internet are not forex brokers in the true sense of the word, but are referred to as such.
- If a trader does not feel experienced enough to do most of his forex trading independently through such a forex platform, he should consult a financial expert in an actual credit institution.
Forex trading and Pip?
The currency market is subject to constant price fluctuations, so it is constantly in motion. Consequently, the price of a currency does not remain the same for a long period of time. These movements in Forex trading are called pip by experts. A pip can consist of a downward or upward movement of a currency rate. The size of the individual movement intervals is not relevant. All currency movements are called a pip, regardless of whether they are large or small.
What does the term Forex mean? Participants in the financial market refer to trading in foreign exchange as Forex trading. The term Forex is an economic anglicism and an artificial word that stands for foreign exchange, which means “to exchange foreign currencies”.
The subject of forex trading
The subject of forex trading and trades are different foreign currencies, which are traded as so-called currency pairs. Foreign exchange trading is particularly interesting for traders due to its global size and importance. The foreign exchange market represents the largest trading volume in the global financial market. Traders achieve daily turnovers in the single-digit trillion range in US dollars on the foreign exchange market. The turnovers, which are almost impossible for the human imagination to grasp, are possible mainly because only in very few cases are actually long-term oriented positions built up and held. Traders handle a large part of their foreign exchange trading in intraday trading. Most stock exchanges around the world record opening hours of no more than twelve hours. However, the foreign exchange market allows trading around the clock, 24 hours a day, seven days a week.
- This fact is not so much due to the fact that a central trading market exists, but rather that the various currency pairs and currencies are traded on every exchange in the world.
- However, the technical term forex trading refers not only to pure currency trading, but also to trading in receivables that are based on specific currencies.
How to recognize a good Forex software?
In general, this question cannot be answered exhaustively for each individual trader. Whether a forex software is suitable for a trader or not depends mainly on the individual requirements and prerequisites. However, a good Forex software should have some indispensable features for Forex trading. The selected Internet platform must support real-time trading, i.e. trading in real time. Only real-time trading is capable of supporting investors’ trades and implementing the quick trading decisions associated with currency trading. In currency trading, traders usually need to make their trading decisions within seconds in order to successfully place their trades in the market. Therefore, a good forex software must be able to respond to traders’ trading decisions instantly.
What software do Forex brokers work with?
The MetaTrader application is highly accepted and popular among traders and investors. Brokers also predominantly use this software and provide interfaces that allow their clients to make their transactions and trades on the Forex market from their PC via the broker trading platforms. However, this forex software is now not just an exclusive trademark of forex brokers, as more and more providers are providing custom software solutions for forex trading. MetaTrader has a variety of features that significantly surpass standard forex software. The research section is broadly positioned and ideally supports the traders’ evaluation and analysis capabilities.
- Traders install the MetaTrader software on their own computers.
- Consequently, it is not a web-based software solution.
- This is the reason why MetaTrader offers such well-positioned information possibilities.
- The interfaces provided by Forex brokers allow traders not only to trade within the currency market, but also to trade other trades such as CFDs.
- Traders familiarize themselves with MetaTrader through the demo program, which they can use free of charge for 14 days.
Who are the market participants in foreign exchange trading?
There are “small” and “large” market participants. The “small” market participants in the foreign exchange and forex market are numerous retail and small investors who provide regular and orderly trading turnover.
However, given this clientele group, one wonders how a single-digit trillion turnover is achieved on this basis. While retail and small investors are also important to the foreign exchange market and can certainly be found in the international foreign exchange market, they are not as significant as the “large” market participants. The foreign exchange market has a large number of institutional investors who enter the market and trade with relatively large financial budgets. However, the most significant trading turnover is provided by banks. The banks operating in the foreign exchange market are divided into different areas according to their interests. Traditional commercial banks trade on behalf of their customers and on their own behalf.
The central banks of the various countries can also be found as market participants and traders in Forex trading. With their engagement they do not aim exclusively at profit, but at supporting the country’s own currency and keeping it stable in value. Due to this goal orientation, the central banks are the only market participants who have an interest in building up and holding their positions in the long term. All other market participants pursue with the foreign exchange trade only one goal: to profit by their short term aligned positions from the currency and market fluctuations and to generate as high as possible price profits.
Day trading is an important topic within Forex trading. In the currency market, traders do most of their trading in the intraday area. Intraday trading means that the traders sell a built and newly entered position within a day, i.e. smooth it out. Intraday trading always occurs when a position is bought and sold within the foreign exchange market in a 24-hour period.
Forex brokers and day trading?
The short-term oriented positions and the very small price fluctuations are the reason why day trading plays such an important role within foreign exchange trading. The price movements and the market move very fast within day trading. These fast movements require equally fast action on the part of the day traders. Forex traders try to place as many trades as possible in the market by placing them in order to take advantage of even the smallest price fluctuations and maximize their profits.
Leverage at forex brokers?
Leverage is a special feature of the currency market. In currency trading, the trader usually does not have to provide the entire capital sum required for the order in advance. He only deposits a security deposit for his trade. This security deposit is called margin deposit. It is considered as a deposit for trading with a higher currency amount. With this strategy, the trader is able to move large trading amounts even with small capital stakes. Leverage enables the chances of large profits, but it can also lead to large losses. Investors should be aware of this risk. The profits and losses of margin stakes are always as high as the notional amount traded. The clear advantage is that investors can move large amounts of capital even with a small stake. However, you may have to bear the losses of the much larger notional trading sum.
Forex trading and lot?
The Lot stands in the foreign exchange trade for the order of magnitude of a lever. Thus, the lot also represents the security deposit that the trader makes for the use of the respective leverage. As a rule, lots are in the order of 1:50, 1:100 and 1:200. 1:100 means that the trader only has to deposit one percent of the traded amount as collateral. With 1,000 US dollars, the trader can move 100,000 US dollars on the currency market in this way.
What are commodity currencies?
Commodity currencies represent a special group of tradable currencies. They are not subdivided like major and minor currencies. Commodity currencies are grouped separately because their performance is closely related to the performance of commodity prices.
Commodity prices are certainly capable of influencing the performance of a currency in the long term. This fact is due to the respective economic situation of a country. The New Zealand dollar, the Canadian dollar and the Australian dollar are among the commodity currencies. These economic nations achieve the main part of their gross domestic product with the mining and processing of raw materials such as gold, silver, oil or gas. In the event of a negative development of the corresponding commodity prices, the national economy and the value of the currencies on which it is based are also affected in the long term. The economic situation and the value of the national currency are dragged down.
- Before investors decide to invest in these commodity currencies, they should first take a close look at the economic development and the development of the commodity market.
- This direct link between commodity prices and currencies can be used well as a reliable indicator of the performance of silver and gold.
What are the best currencies to trade with Forex Brokers?
Market participants who are interested in investing money in foreign exchange trading on the Forex market should take a close look at the different tradable currencies in advance, because they are divided into two groups.
Currencies represent a means of payment in one or more economic areas and states, so they all have the same function. However, in Forex trading there are the so-called minors and majors. Major currencies record the strong currencies important for the Forex market and its participants. They account for more than ninety percent of the trading turnover. This elite group records only seven currencies: Euro, US dollar, Swiss franc, Australian dollar, Canadian dollar, British pound sterling and Japanese yen. The economic and political circumstances of the countries involved are responsible for this allocation. Historical reasons have nothing to do with this development.
The euro and the U.S. dollar also have the advantage of being means of payment in the most important economic markets and economic areas. The countries of the major currency group are among the most important economic nations in the world. Their stable political and economic conditions make these currencies secure in value and stable. Nevertheless, the major-currencies group also shows great differences.
- The U.S. dollar is particularly strong, dominating fifty percent of the total turnover on the international currency market.
- The euro can certainly keep up with the U.S. dollar, but it is not quite as dominantly represented.
- The most traded currency pair is euro and US dollar, which generates up to thirty percent of the traded daily turnover.
- The group of minor currencies mostly records the so-called exotic currencies.
- Financial experts refer to these currencies as minor currencies.
The share of minor currencies in the global foreign exchange market is much larger than the share of major currencies, and yet they account for only ten percent of the trading turnover generated worldwide. In many cases, minor currencies are assigned to countries with political and economic instability. For this reason, they are not popular for Forex trading. Nevertheless, traders can make quite good profits trading these currencies if they are willing to take a greater risk of loss than trading major currencies. The most common minor currencies are the Swedish krona and the Danish krone or the Korean kuna. By investing in these currencies, the investor always assumes an increased risk due to the nationally determined economic and political conditions. As a rule, investors want to eliminate these uncertainties and therefore very few exotic currency pairs are traded on the Forex market. Mostly, minor currencies are traded only as a pair with a major currency. For European currencies, the Euro is usually the counterpart, while for the rest of the minor currencies, the US dollar is usually the second part of the pair.
The euro and the US dollar are by far the most important currencies on the international foreign exchange market. A quarter of all trades made on the global financial market are based on this currency pair. The trading volume of these two currencies is unlikely to change in the future, as they are too important for international currency and economic trading.