The forex or FX market is the foreign currency exchange market. In recent years, the FX market has been the world’s largest capital market, with an average daily transaction of more than $5 billion. Forex trading is becoming increasingly popular, and for good reason. It provides investors with many benefits that are tough to discover in other types of investment. Although there are many forex pros, we can also encounter many drawbacks to this type of trading.
If you are interested in forex trading, it is essential to research and understand this market’s pros and cons. With the right tools and strategies, you can benefit from the many advantages forex trading offers while minimizing potential risks. This article will overview the benefits of forex trading and why it can be a suitable fit for you. For more specific MT4 traders, you can check our article on the best MT4 brokers in the UK.
Accessibility: The forex market is one of the most accessible markets to get started. You can open an account from anywhere in the world and start trading with as low as $1. On the other hand, you can trade anytime because there is always a forex market open 24h a day.
Leverage: Unlike the stock market, which only allows leverage in a margin account at a 2:1 ratio, in the forex markets, you can leverage up to 1000:1. Evidently, this poses some risks, and you should inform yourself carefully before making any trade.
High liquidity: Because of the size of the forex market, the quantity of buying and selling volume that occurs at any one time is enormous! This increases market liquidity, and higher market liquidity allows for big transactions to occur without big alterations on the price.
Reduced trading costs: When comparing forex trading with other markets, the trading costs are relatively low. This happens because brokers make money through pips. In addition, various brokers offer low spreads.
Possibility of quick returns: Due to the high volatility of this market, there is a real possibility of earning quick returns. On the other hand, you can also lose money just as quickly. For this reason, you should only invest what you can afford to lose.
Leverage: Leverage is a double-edged sword. While it can increase your earnings exponentially, it can also magnify your losses. As always, don’t invest what you are not prepared to lose.
Low regulation: The forex market presents lower regulation when compared to other markets. This means that some online brokers operate with little or no supervision. Always check if the broker is regulated by the Financial Conduct Authority (FCA) in the UK, the Commodities Futures Trading Commission (CFTC) in the US, or the Cyprus Securities and Exchange Commission (CySEC) in the EU.
Volatility: Volatile financial products are great for winnings and terrible for losses. For less experienced traders, this may be challenging to incorporate into their decisions. When thinking about the medium and long term, the short-term volatility of the forex market can catch you off guard.
How to Invest in Forex
When investing in the forex market, you should research the market and choose a reputable broker. This will help ensure that your trades are executed safely and securely.Here are our choices for the best brokers to invest in the forex market:
eToro is one of the largest trading platforms in the world. Founded in Israel in 2007, its trading platform allows users to buy and sell assets such as stocks, ETFs, and thousands of CFD products. Moreover, you can also buy and sell cryptocurrencies.
One of the main features of eToro is the Social Trading aspect of its platform. Users can share their trades so everyone can learn and copy from their favourite traders. eToro has over 25 million clients in more than 140 countries.
✔️ Commission-free stock and ETF trading
✔️ Social Trading
✔️ Broad educational resources
✔️ Fractional share purchases
✔️ Transparency on fees
❌ Dollar base currency.
❌ Conversion fees
❌ Lack of data about the financial instruments
❌ Small offer of cryptocurrencies
eToro is best for
- Social Investing
- ETF and stock trading
eToro Platform and Educational resources
This platform has a unique and beautiful design with an intuitive user experience both on desktop and mobile. The menus are easy to navigate, and the information is crystal clear. The actual data on the various companies and stocks could be more in-depth, but that could compromise the ease of the platform.
The educational resources are vast and sound. They range from articles, videos or even courses you can take. All in all, it serves its function very well.
eToro Commissions and Fees
There are no commissions for stocks and ETFs. However, trading crypto can become expensive as eToro charges a 1% fee plus spread on crypto transactions. There is also an inactive fee. If you don’t log in for a whole year, you pay $10 monthly.
Etoro Customer Service and Security
eToro‘s FAQ section has multiple articles covering most topics that can generate questions. The answers are in-depth and satisfactory. Notwithstanding, regarding traditional customer service, the offerings are short. The platform doesn’t provide any phone number, and there is no live chat.
Regarding security, eToro is highly regulated by trusted institutions such as the Financial Conduct Authority (FCA) in the UK. If eToro goes bankrupt, clients can also expect to be compensated until the cap of £85,000, guaranteed by the Financial Services Compensation Scheme (FSCS). In terms of the login, there is also a two-step login which is always a safer option.
How to open an account in eToro
The account opening process on eToro is strikingly simple, wholly digital and super fast. You start by registering with your email account and immediately gain access to the £100.000 demo account. After this step, to deposit funds and trade, you need to provide proof of identity and proof of residency. The whole process can be done in one day.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Products: Stocks, Bonds, Mutual funds, ETFs, Options, Fractional shares, Futures, Forex, Commodities
Regulatory entities: FINRA, SIPC, SEC, CFTC, IIROC, FCA, CBI, AFSL, SFC, SEBI, MAS, MNB
Minimum Deposit UK: £0
Demo Account? Yes (£1,000,000)
Current chairman Thomas Peterffy founded Interactive Brokers in 1993. It is the go-to platform for intermediate and advanced investors. Although it doesn’t have the most appealing design, in terms of the variety of research reports, access to international markets, tools, calculators, and instructional resources, Interactive Brokers is unparalleled.
This trading platform has an astounding range of products, from stocks to ETFs, forex and options. Interactive Brokers is a low-cost firm with a very transparent and competitive pricing schedule.
✔️ Multiple features
✔️ Sophisticated platform
✔️ Very low commissions and margin rates
✔️ Sustainable investments available with the Impact Dashboard and app
✔️ Offers ISA accounts
✔️ GlobalTrader provides an excellent alternative for beginners
❌ Not very intuitive
❌ Requires more knowledge to take full advantage of all features
❌ Deposits only by bank transfer in the UK
Interactive Brokers is best for
- Keeping expenses small
- Margin usage
- Day traders
- Intermediate to advanced traders
Interactive Brokers Platform and Educational resources
The web and mobile app platforms are very robust, providing plenty of information to the informed trader. Although it does not have the most beautiful design, this trading platform serves its purpose. It has a vast selection of educational resources to learn more before you start trading.
Interactive Brokers Commissions and Fees
This is where Interactive Brokers shines. Besides offering lots of financial products, the broker also has some of the industry’s smallest fees and margin rates (up to 60% lower than the industry). There are no account fees.
Interactive Brokers Customer Service and Security
This online broker offers 24 hours a day phone, email, and chat, six days a week. In terms of safety, it is regulated by the UK’s Financial Conduct Authority (FCA) and the US Securities and Exchange Commission (SEC). In short, IB is a safe service provider, as evidenced by the broker’s several top-tier regulator licenses, long track record, and publicly reported financials. It is also listed on the stock market with the ticker IBKR.
How to open an account in Interactive Brokers
To open a brokerage account, first you must choose the type of account you want. There are two account types: IBKR Lite or IBKR Pro. Afterwards, you just need to send the usual personal info and regulatory information, verify your identity, sign a contract, fund your account, and start investing!
Forex trading can be a great way to earn potentially high returns on your investment. However, it is vital to be aware of the risks and potential downsides that come with this type of investing. With careful research and knowledge, you can determine if forex trading is the right fit for you.
As always, we hope we have helped you with this article and recommend that you invest safely and read as much information as you can before making any investment decisions!