What Is Forex Trading?

Forex trading can be a little difficult to understand for new traders but is really very simple in its operation. Unlike traditional stock market trading where you are buying a position in a company through stock, Forex trading is based on the difference between two international currency values and you profit by being on the right side of their movement in value. In essence you are making a bet on a set of currency pairs and hoping the one you chose becomes more valuable. Forex trading is done through a comparison of these currency pairs and your profit lies in the movement of one of the pair over the other. These movements might be very small and for you to make a larger profit from these minor movements, you’ll need to have a larger position than you might with additional stocks. Many Forex brokers will also extend you a measure of leverage that allows your investment to control a larger portion of stock than it actually represents. This leverage enables you to collect a substantial profit from very small movements in currency values, in a very short amount of time. Most movement into and out of a position lasts less than a day in the Forex market unlike traditional stocks that you may hold for months.

Best Forex Brokers

BrokerOverviewMore InfoOpen an Account

Plus500

Min. Deposit: €100
Min. Margin: 0.33%
Max. leverage: 1:300
Spread EUR/USD: min. 2 Pips
Plus500 is a CFD service
Commodities: Yes
FX-Pairs: 59
Special Features: Get $25 to trade (UK, AU, NZ, ZA and DE only). T&Cs Apply
www.plus500.com
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Your capital is at risk
Plus500 Review

AvaTrade

Min. Deposit: €100
Min. Margin: 0,5%
Max. Leverage: 1:200
Spread EUR/USD: 3 Pips
FX-Pairs: 44
Commodities: Yes
CFD: Yes
Special Features: Metatrader
www.avatrade.com
Open a Demo or Live Account

AvaTrade Review

easyMarkets

Min. Deposit: €100
Min. Margin: 0,25%
Max. Leverage: 1:400
Spread EUR/USD: 2 Pips
FX-Pairs: 136
Commodities: Yes
CFD: Yes
Special Features: Guest-Account
www.easymarkets.com
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easyMarkets Review

Best Social Trading Broker

BrokerOverviewMore InfoOpen an Account

eToro

Min. Deposit: €50
Min. Margin: 0,25%
Max. Leverage: 1:400
Spread EUR/USD: 3 Pips
FX-Pairs: 16
Commodities: Yes
CFD: No
Special Features: CopyTrader
www.etoro.com
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Trading involves risk
eToro Review

Trade Forex Longer

The Forex market also differs from other stock markets in that it’s available around the clock for most of the week. This means you can make trades at all hours of the day and night because of this extended trading time. This is a welcome change for many investors who may not have the time to trade during a busy workday.

Research Is Simpler

The advantage of only having to research a set of currencies makes Forex trading simpler for most investors. Even though this comparison can involve a lot of work, there are a large number of tools and programs to help you spot opportunities for profit in this market. Some investors will do this research themselves and others use a brokerage service to guide them on the proper investments to make.

Understand How To Identify The Best Trades

With Forex investing you initially compare a set of currencies that are traded together in a currency pair. The value of these two currencies is set when you make your investment and will change over time. For your trade to be profitable, you’ll want to own the currency in the pair that increases in value against the other currency so you can exit the position with a profit. This change in value can happen very quickly due to events inside and outside of the country the currency represents so you’ll need to monitor your investment regularly for these movements and take as much profit from the trade as possible. There are a number of tools and programs you can use to help you make these trades automatically. As you gain more experience with Forex trading you can start to use these automated tools to help you with your trades.