Disclaimer: The products or services discussed in this article may not be offered by Taurex and may only be listed here for educational purposes.
A Bank of International Settlements report mentioned that forex trading reached $7.5 trillion in daily global trading volume in 2022. Such a significant figure suggests that forex is a popular financial instrument to trade worldwide.
If you plan to start trading forex, you might wonder where and how to find the best forex brokers. How do you know if your broker is regulated? Do you even need to work with a broker to trade forex?
This article explores and compares the different forex brokers to help you decide which best fits your needs. Also, this article discusses the advantages and disadvantages of trading forex.
Which Forex Broker Is the Best?
Not all forex brokers are the same. Some may be excellent for specific trades, while others may provide better trading tools. In other words, the best forex broker for you is one that provides all or most of your trading needs.
Which Forex Broker Is the Best for Beginners?
Taurex is an online broker that provides you with several account types, each tailored to your distinct trading styles.
You can trade forex, commodities, metals, and indices and utilise a leverage ratio of up to 1-to-1,000 for a low account minimum of $100.
Which Broker Is the Best in MT4?
Taurex offers you a convenient, flexible trading experience using MetaTrader 4 by providing a user-friendly platform and access to a broad range of trading instruments in a secure, stable environment.
There’s no consensus on what is the best forex trading platform. However, MetaTrader 4 seamlessly adapts to your devices, whether you use the internet, desktop, iOS, or Android.
Taurex also offers MetaTrader 5, which has more advanced and reliable features, and the Taurex mobile trading app, which provides an intuitive, seamless trading experience.
Who Is the Cheapest Forex Broker?
To help traders focus more on trades than fees, Taurex doesn’t charge for deposits and can be free of hidden costs. However, your bank may charge you for the transaction or currency exchange.
Although Taurex doesn’t guarantee the cheapest rates, it can help keep your trading costs down by offering no commission fees for Standard Zero and Pro Zero accounts.
Are My Funds Safe With Taurex?
Taurex executes forex trades using the electronic communication network (ECN).
ECN is a computer-based system that provides the best available bid and ask quotes and automatically matches and executes your orders.
ECN has price feed transparency to help limit price manipulation since past and current information are readily available to everyone, making it more difficult to act unscrupulously.
What Is a Forex Broker?
Forex brokers are financial institutions acting as intermediaries between individual trader clients and the foreign exchange market. A web-based broker offers traders an opportunity to execute forex deals through the broker’s supported online trading platforms.
Who Are Forex Brokers?
The role of forex brokers is to provide you access to forex markets or other financial instruments and allow you to start even with small investments.
What Does a Forex Broker Do?
A forex broker is a company or individual licensed or exempted by an authorised regulator to let you buy or sell foreign currencies.
The forex broker can offer you the underlying currency depending on relevant country-specific regulatory restrictions.
How Does Forex Work?
Forex trading is like exchanging currency when travelling abroad: You sell one currency and buy the other. Supply and demand can cause the exchange rate to fluctuate constantly.
When you buy and sell currencies, you usually trade them in pairs. For example, you can exchange British pounds for U.S. dollars and vice versa.
Regulated Forex Broker
With forex being a decentralised market and the number of forex brokers increasing, countries have established authorities to oversee the market and regulate forex broker firms.
Regulators include the following:
- Financial Conduct Authority (FCA) in the U.K.
- Commodity Futures Trading Commission (CFTC ) and National Futures Association (NFA) in the U.S.
- Monetary Authority of Singapore (MAS) in Singapore
- Australian Securities and Investments Commission (ASIC) in Australia
Forex regulators constantly check whether brokers take measures to protect clients and allow traders to file complaints. Regulatory conditions and rules vary between regulators.
“How Do I Know Whether My Forex Broker Is Regulated or Not?”
The following guidelines may help determine if your forex broker is well-trusted and regulated to help you avoid forex scams:
- Check the license number: Look for the broker’s registration number, usually shown on the broker’s website’s “About Us” page or disclosure text at the bottom of the homepage.
- Confirm the broker’s public profile and regulatory status: Validate the broker’s registration number by looking up the legal brand or company name on the regulator’s website.
- Check the global availability: Confirm that the regulated broker accepts clients in your country. If the broker doesn’t have regulations in your home country, check if the broker can legally receive clients from your country.
- Verify with the regulator: Call or email the regulator if you have doubts regarding the legitimacy of a broker’s claims of being regulated.
Do I Need a Broker for Forex?
You must work with a forex broker to trade forex. The broker provides mechanisms allowing you to open an account and deposit enough margin or collateral to buy or sell forex.
The broker executes your orders internally by acting as your trade’s principal (market maker) or as your agent and sending your orders to another market.
Do I Need a License for Trading Forex?
Trading through a forex brokerage allows you to transact without needing a financial or dealer license. Working with a broker gives you plenty of opportunities to trade forex, even with a relatively small investment.
How Much Money Do You Need to Start Trading Forex?
The amount of capital needed to trade forex depends on multiple factors, including your trading goals, financial situation, and risk tolerance.
For example, some brokers allow beginner forex traders to start trading for as low as $100. However, it’s common for professional day traders to have higher amounts in their trading accounts.
After opening an account, your next step is to decide on a trading budget. Determining this amount is necessary, given the risks of trading forex from a margin account.
A margin account lets you borrow money from a broker, so you don’t have to fund the trade’s entire value.
Regardless of your trading budget, you must choose a reliable and secure method for depositing funds to and withdrawing from your live trading account.
Ways to Trade Forex
Most forex trades aren’t for exchanging currencies like you do when you’re travelling abroad but rather for speculating future price movements, similar to stock exchange trading.
Forex traders attempt to buy currencies speculated to increase in value compared to other currencies. At the same time, they sell currencies whose purchasing power is expected to decrease.
You can trade forex in three different ways depending on your goals:
- Spot market: This market is the primary market where you swap forex pairs and determine real-time exchange rates based on supply and demand.
- Forward market: The forward market lets you enter a binding (private) contract with another trader instead of executing a trade now. This contract locks in an exchange rate for an agreed amount of currency in the future.
- Futures market: This market allows you to buy or sell currencies at a specific amount at a future date and predetermined exchange rate. Unlike the forward market, trades on a futures market execute on an exchange.
Forex Terminology
Before you engage in currency trading, consider learning the following terms you’ll likely encounter in the forex market:
- Bid-ask spread: This spread is the variance between the maximum amount buyers are willing to bid (pay for a currency) and the minimum price sellers ask (require to sell).
- Currency pair: This consists of two currencies with which you exchange one for the other. One example is the EUR/USD pair consisting of the euro and the U.S. dollar.
- Lot: The standardised unit of currency when trading forex is called a lot. Lot sizes typically amount to 100,000 currency units. Other lot sizes available for trading include mini (10,000) and micro (1,000).
- Leverage: “Leverage” is another word for borrowing money. Leverage lets traders participate in the forex market without having the required deposit amount.
- Margin: This is the upfront money needed to trade with leverage. A 50-to-1 ratio means purchasing $1,000 worth of currency requires a $20 margin deposit ($1,000 ÷ 50 = $20).
- Pip: A pip is the smallest possible price movement in a currency pair. Forex prices quote at least four decimal places, so a pip equals 0.0001. Pip is short for percentage in points.
Online Trading
Forex trading isn’t only for professional traders. With online trading platforms providing more opportunities to trade in forex markets, even private investors wanting to diversify their portfolios can also trade forex over the internet.
What Is Foreign Exchange Trading?
Foreign exchange trading, also called FX or forex trading, is a global market for exchanging foreign currencies.
Forex is the largest market worldwide. The trades happening in this market can affect everything from the price of Chinese-imported clothing to the amount you pay for a margarita while touring Mexico.
Diversification
This risk management strategy mixes various investments in your portfolio. A diversified portfolio contains different asset types and investment instruments to help limit your exposure to any single risk.
Why Trade Forex
People have different reasons for trading forex. If you prefer trading assets with high liquidity, reasonable volatility, and large volumes in a market open 24 hours daily, consider forex as your financial market of choice to trade.
Forex Pros and Cons
The forex market has the following advantages and disadvantages you must know before trading currencies.
Pros
- High leverage: Using leverage in foreign exchange trading allows you to control potentially large positions even with a small margin deposit.
This feature may increase risk because a losing trade means significant potential losses. However, leverage also lets you profit more from relatively small price movements.
- High liquidity: The major currency pairs in the forex market have high levels of liquidity, allowing you to execute sizable transactions in those pairs anytime during regular trading hours.
- Round-the-clock trading: The forex market remains open for trading from 5:00 PM Eastern Standard Time (EST) on Sundays until 5:00 PM EST on Fridays, even during U.S. holidays. This availability creates ongoing trading opportunities during market hours.
Cons
- Fewer asset choices: While the stock market has numerous stocks you can trade, the forex market only has relatively few currency pairs available to forex traders. Also, only some of these pairs are highly liquid, like the major currencies.
- Volatility: Experienced traders rely on volatility to profit from the price movements of the forex market. However, a high level of volatility can result in unexpected gains or significant losses for traders.
- Unregulated OTC market: Forex traders transact their trades over the counter (OTC) instead of an exchange, meaning the forex market remains largely unregulated.
Still, many jurisdictions implement regulations to help protect retail traders making transactions through online brokers.
Forex Markets Explained
If you trade forex, you agree to exchange one currency for another at a price called the exchange rate. This rate fluctuates depending on the supply and demand and the forex market’s overall expectations of future events.
Active traders can make money on a forex transaction in two ways:
- Go long (buy a specific currency): You earn a potential profit if its value goes up against the currency you sold.
- Go short (sell a currency): You earn a profit if the asset’s price goes down versus the money you bought.
Risk and Reward in Forex Trading
When you make forex trades, most of the risk in your transactions is when the market doesn’t perform as expected once you complete a forex trade.
Many brokers provide you with leverage to help magnify the gains or losses you take on a position.
For instance, a 500-to-1 leverage ratio means you can enter a trade worth $500 with a $1 margin deposit. Conversely, such a ratio means you can risk losing significantly if your position goes the other way.
To help control your trades and limit losses, consider implementing a minimum risk-reward ratio before entering a trade. If you’re a beginner, a risk-reward ratio of 1-to-2 or 1-to-3 may be sufficient.
How Are Currencies Traded?
Currencies are typically written with a three-letter code. Examples include:
- British pound: GBP
- U.S. dollar: USD
- Euro: EUR
- Japanese yen: JPY
Although more than 180 different currencies exist worldwide, most forex brokers don’t trade all of them.
When trading currencies, you usually select a currency pair consisting of a base currency, written on the left side and always set to one, and a quote currency, written on the right.
If you have a GBP/USD pair trading at 1.25, this figure means £1 is worth $1.25, or it takes 1.25 U.S. dollars to buy 1 British pound.
How to Get Started With Forex Trading
The following sections discuss the steps you should consider taking to begin your forex trading journey.
Research
Learn as much as possible about forex and familiarise yourself with frequently used terminologies, strategies like copy trading, scalping, and news trading, and technical analysis indicators like moving averages and RSI (relative strength index).
Some brokers have a dedicated website page for in-depth client education and provide educational materials like books, webinars, and podcasts.
Open (and Fund) Your Trading Account
After choosing and signing up with a suitable forex broker, fund your trading account by depositing funds. For your convenience, many forex brokers offer multiple payment options like electronic payments, credit cards, and bank transfers.
If you aren’t ready for real-money trading, consider using a free trading or demo account account to practise without risking any money.
Use a Trading Platform
Brokers can provide access or require you to download a forex trading platform to trade currencies.
One well-known trading platform is MetaTrader. Other examples include cTrader and WebTrader. You can download these trading platforms to your desktop or mobile device.
Start Trading
After funding your account and accessing a forex trading platform, you can start trading forex. Select a currency pair to trade, specify the amount you wish to trade and place your order.
Is Forex Trading Legal?
Trading forex is legal across the world. Forex brokers must follow strict operational and reporting guidelines to keep their business.
Most countries have a regulatory authority providing the rules and standards that retail forex brokers must follow.
Are Forex Gains Taxable?
If you’re a trader whose income source comes partially or fully from forex trading, you’re liable to taxation due to your income, capital gains, or corporate tax.
Spread betting is exempt from capital gains tax. However, trading forex makes you liable to pay capital gains tax after profiting.
Consult a tax advisor if you’re uncertain about the taxes you must pay for trading forex.
Are Forex Brokers Worth It?
Forex brokers play a vital role in connecting you to the currency pairs you need and executing your orders.
Some brokers have inactivity fees for dormant accounts or clients who don’t trade for a certain period. Check the broker’s trading costs and disclaimers to ensure you’re protected while making money.
Consider choosing brokers offering low spreads, which allows you to enter and exit trades at more favourable rates.
Also, look for brokers that execute trades using STP (straight-through processing), an automated electronic transfer process without manual intervention.
FAQs
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What if I’m new to forex trading?
If you’re new to forex trading, exercise caution and take your time educating yourself on what assets you wish to trade. Several forex trading platforms offer plenty of educational resources and research tools to help you trade more effectively.
Next, compare forex brokers and choose one that suits your trading style and needs.
Taurex strives to be a top forex broker of choice by providing retail investor accounts with a reliable trading system, advanced trading tools, comprehensive education, and accessibility across different devices for convenient, seamless trading.
Taurex also offers real-time assistance and personalised guidance with live customer support.
Also, consider social trading, a form of online trading, to connect and share information, insights, and strategies with other traders.
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Can forex trading make me rich?
Forex is not a get-rich-quick scheme and can cause substantial losses if you don’t have a trading strategy or learn the ins and outs.
There’s no guarantee that you will trade successfully, even after mastering the markets. Price movements can be fast, and you can permanently lose your capital.
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Can a forex broker steal my money?
Unregulated brokers are more likely to perform theft, such as through fund conversion (switching from one fund class to another).
Other ways unscrupulous brokers can steal your money include:
- Unauthorised trading
- Misrepresentation or omission of material facts
- Negligent portfolio management
- Unsuitable investment recommendation
- Excessive trading
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What if I have limited forex trading funds?
In many cases, you can start trading for as little as $100. Still, it’s important to note that forex trades in standard lots of 100,000 units. Such an amount suggests that you may need to invest more than $100.
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Do I need a mobile platform for forex trading?
Suppose you spend most of your time travelling and need a way to use your mobile device, like a tablet or smartphone, for trading. You must download a functional mobile app for forex trading before you can buy and sell assets on your device.
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Am I an intermediate or advanced forex trader?
You may be an intermediate forex trader if you have the following characteristics:
- You have little trading experience.
- You’re still finding your strategy.
- You’re willing to get better at trading.
- You don’t have a large enough capital.
On the other hand, you may consider yourself an advanced trader if:
- You have a historically proven strategy that makes consistent profits over time.
- You don’t let emotions interfere with your trades.
- You have a solid risk management plan.
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Can I trade a wide range of instruments?
Taurex lets you trade over 1,500 instruments, including forex, shares, indices, metals, and commodities.
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute financial advice. It is not intended to be a recommendation to buy or sell any financial instrument or engage in any investment activity.
While we strive to provide accurate and up-to-date information, we do not guarantee its completeness or accuracy. We rely on various sources for the information presented, and we cannot guarantee the reliability or accuracy of these sources.
The information provided here does not necessarily reflect the products or services offered by our company. Any mention of financial products or services is for informational purposes only and should not be considered an endorsement.
All investments involve risk, including the potential for loss of principal.
This information should not be considered as financial advice. You should always seek professional financial advice from a qualified advisor before making any investment decisions.
References
- What Is Forex Trading? A Beginner’s Guide
https://www.investopedia.com/articles/forex/11/why-trade-forex.asp
- Margin Account: Definition, How It Works, and Example
