Foreign Exchanging Trading
What is forex?
In laymens terms, it is the global market that allows for the exchange of one currency for another. If you’ve ever traveled to another country, you usually had to find a currency exchange booth at the airport, and then exchange that money you have in your wallet into the currency of the country you are visiting.
This market allows for the trading of currency pairs – in its relation to each other. Market movement is determined by consumer sentiment, banks and their economic policies and the driving force of supply and demand that push prices up or down.
The foreign exchange market, which is usually known as “forex” or “FX,” is the largest financial market in the world. To put this matter into perspective, the foreign exchange market is larger than New York Stock Exchange, London and Tokyo COMBINED.
The US Stock Exchange trades roughly $22.4 billion per day, where as the the foreign exchange market trades at $5 Trillion per day.
So what exactly are you trading in the Forex market?
The simple answer is MONEY.
Because you’re not buying anything physical, forex trading can be confusing.
Think of buying a currency as buying a share in a particular country, kinda like buying stocks of a company.
The price of the currency is usually a direct reflection of the market’s opinion on the current and future health of its respective economy.
In forex trading, when you buy, say, the Japanese yen, you are basically buying a “share” in the Japanese economy.
You are betting that the Japanese economy is doing well, and will even get better as time goes. Once you sell those “shares” back to the market, hopefully, you will end up with a profit.
So is there a fee or something of the sort?
Foreign exchange works with something called spreads. These spreads are basically the commission that your broker charges every time you take a long or short trade—in other words, when you execute an order to bet that a currency will go up or down.
Certain brokers charge more than others and that is why there are customers all over the world signed up with over hundreds of different brokers. Generally, the price is measured in pips (percentage in points) which equate to a few dollars for every $1000 of capital that you invest.
Is this like the stock market?
Kind of… There are certainly parallels to be made from the New York Stock exchange to the forex market. However, the forex market stays open 24 hours…. As the NYSE closes, another exchange in tokyo, Australia etc open in other parts of the world. Remember.. you are trading the PAIRS, not necessarily one currency. So while you may have an American currency, remember that the other half of the pair may have just open with some impending news that will surely send the pair into volatile waters. Here are the general trading “session times” for each market, even though the overall trading is happening 24 hours a day from Monday to Friday.
As you can see, there is some overlap between time zones which increase the volatility and overall volume of the currencies exchanged during that time period. Take a look at the difference in price movements during different trading sessions:
Unlike the stock market however, you are able to trade anywhere from 50x to 200x the amount of money that you hold. That means for every $1000, you can the trading capability of trading $50,000 worth of units! That is some serious leverage so please trade carefully. You can lose all of your money in a single trade so please make sure you utilize proper risk management. More about to that to come.
So where do I trade foreign exchange?
There are many brokers that allow you to trade foreign exchange currencies all around the world. For the purpose of our customers who are mostly American or Canadian, we will go over the top forex brokers in the United States.
Best US Forex Brokers 2020
- IG– Best Overall
- TD Ameritrade– Currency trading with thinkorswim
- com– Best for ease of use
- Interactive Brokers– Best for professionals
As an early pioneer in offering contracts for difference (CFDs) and spread betting, IG was founded in 1974 and has grown to be a global leader in the online trading industry. IG is a London-based public company listed on the London Stock Exchange’s FTSE 250 (LON: IGG).
- Total Forex Pairs Offered:91
- Likes:Comprehensive research tools and real-time exchange data; Broad range of markets, currency pairs, and multi asset CFDs (including cryptocurrencies); Licensed in major regulatory jurisdictions; Competitive commission-based pricing and spreads on forex.
- Dislikes:Web platform trading windows must be resized manually to keep the layout organized; Forex Direct only available to professional traders within EU.
- Bottom Line:Forex and CFD traders looking to trade a large number of instruments across multiple asset classes, including exchange-traded securities on international exchanges, will find IG offers an extensive range of tradable products on its platforms.
- Open an Account
TD Ameritrade’s desktop trading platform, thinkorswim, offers an impressive combination of both design and functionality. The platform has virtually anything you could want, including live CNBC tv, trade alerts, real-time scanning, and practically every technical indicator under the sun for charting.
- Total Forex Pairs Offered:75
- Likes:Powerful desktop charting that syncs with mobile; Wide array of premium research and trading tools through thinkorswim platform; Futures and options trading on forex and bitcoin futures.
- Dislikes:Forex only available to US residents; No web-based platform offered for forex; Platform complexity may deter beginners.
- Bottom Line:For US-based investors and traders, TD Ameritrade’s thinkorswim platform is a sophisticated multi-asset desktop experience optimized for securities trading, including off-exchange spot forex and exchange-traded options and futures (including Bitcoin).
- Open an Account
Forex.com (Gain Capital) is known for providing forex traders a well-rounded offering. Like TD Ameritrade and Interactive Brokers, it is also publicly traded and offers fx traders a large variety of trading tools. Beyond offering its own propertiary trading platform, Forex.com also offers MetaTrader4 (MT4) to customers, making it an ideal choice for investors of all experience levels.
- Total Forex Pairs Offered:84
- Likes:Licensed in highly regulated jurisdictions; Advanced charting capabilities in both desktop and web platforms; Platforms feature numerous channels of research content and trading ideas; Offers Cryptocurrency CFDs in the UK, and Bitcoin Futures in the US.
- Dislikes:MT5 not yet rolled out; Ceased business of regulated activities in Hong Kong.
- Bottom Line:com has plenty of options for Forex and CFD traders across its regulated offerings globally. With full-feature platforms, diverse trading tools, and comprehensive research, FOREX.com caters to traders of all experience levels.
- Open an Account
Professional currency traders should consider Interactive Brokers. Interactive Brokers is well-known in the US stock and options industry as an active trading broker. IMPORTANT: To trade forex with Interactive Brokers in the United States, you must be classified as an ECP, “An Eligible Contract Participant is generally an individual or organization with assets of over $10 MM (or $5 MM if trades are hedging).”
- Total Forex Pairs Offered:115
- Likes:Regulated in major jurisdictions and publicly traded; Extensive range of global markets and asset classes; Bitcoin futures trading supported; Competitive fees and discounts for high-volume traders.
- Dislikes:Retail spot forex only offered to non-U.S. clients; Desktop platform too complex for inexperienced traders; Web platform lacks forex charts; Monthly minimum activity charges.
- Bottom Line:Professional traders and highly experienced investors looking for a complete multi-asset forex broker will find Interactive Brokers offers a comprehensive platform with competitive fees across multiple global financial markets.
- Open an Account
How much money do I need?
The beauty of forex is that you can start with as little as $100. Obviously, its important to understand that the relationship between profits and losses are in direct proportion to the amount you put. We never endorse a specific amount but suggest that $1000 is a good amount to get started. If you feel comfortable, you can always add more! Remember, the markets are volatile and you should trade at your own risk! While that’s true, we boast a 93.6% success record on all of our trades.
Remember to make sure that you NEVER trade more than 2% of your entire account PER trade, and no more than 8% of our total equity at a time. We will make some rare exceptions, but for the most part this is the golden rule to trading forex.
Can I practice first?
Ofcourse! FXCM offers a demo account with $50,000 USD. You should probably use the account sparingly and try your hand at forex by using only $5000 of capital.
How do I get your signals?
You are welcome to join our Discord channel where we provide live updates to our members. Our Fx channel provides swing trades, day trades and gives you recommendations on how much equity to use based on your account value. To join our group, head over to our services section to start purchasing.
What pairs do you trade the most?
There are no pairs that I trade more than the others. I typically look at the charts in the morning (7am EST) and then again at 1pm and again at 7-9pm EST. Depending on what the charts are showing at the very moment, I will initiate an entry and an exit, barring any forecasted news.
How reliable are your signals?
We happily boast a 93.6% accuracy rate. Please bear in mind that no two pairs and no two trades will be the same. One trade can take 20 minutes while others will take 2-3 days to fully close.
I work a full time job. Can I sill trade?
I work 9-5. How do I make sure I get your signals and what if I cant access my phone or computer? Will I lose my money? Absolutely not. At ILM, we teach you guys how to take entry and initiate a take profit and a stop loss. A take profit exits you out of a trade when it reaches a target price and a stop loss ensures that you are exited out of a trade when its not going your way. Many of our clients happily wake up to profits every week.
Can I learn with no experience?
Absolutely. Trade with us for 90 days and feel free to ask any and all questions in our fx lounge. You’ll become a very good trader if you are motivated and spend the time to learn.