As a beginner in Forex trading, you need a lot of knowledge to enable you to make headway in Forex trading. The Forex market is dynamic and this is why you must keep on acquiring more knowledge day by day. Lack of knowledge can negatively affect you and make you record losses. This is why we have set up or services so that Forex traders in the UK can have a place where they can trust for helpful information about Forex trading. Our purpose is to open your eyes to some of the very important things you need to bear in mind as a Forex trader.
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At Forex365, we always update the information about Forex that is posted on our site so that our revered visitors can be given the latest information that they need to have about Forex trading. This way, they can always make an informed decision when they trade Forex. In the reading sections, we will enlighten you about the things you need to know. We will show you how to make the right decisions in FX trading. Just continue reading to learn everything you need to know about Forex trading.
What is FX trading?
Forex stands for Foreign Exchange. You can also call it FX; they mean the same thing. FX trading is a global market and it is available over the counter. This means that you will not have to go through anyone before you can start trading Forex. You only need to register on the platform of a broker and you can start making money without hindrance whatsoever. Anyone or any part of the world can participate in FX trading UK. Some of the participants are:
These individuals or organizations come together to buy, sell, speculate, or exchange currencies. You can do this from virtually any part of the world.
FX trading takes place over the interbank market. This is an online channel via which the trading of currencies takes place. The trading activities also take place 24/5. This means that you can trade Forex from Mondays to Fridays at any time whatsoever. There is no trading at all during the weekend. Today, the daily turnover in the Forex market is over US$5 trillion. This indicates that it is a huge market. The Forex market is the highest in terms of turnover.
You need a good understanding of Forex pairs to trade Forex. Forex trading UK occurs in pairs. They are called currency pairs. The currencies that make up the pair are called base and quote currencies. The base currency is the first one. The quote currency is the second. In EUR/USD, for example, the EUR is the base currency and the USD is the quote currency. The EUR/USD is among the most common among currency pairs.
The base currency is the first of the two in a currency pair. You can buy or sell it in exchange for the quote currency. A trader will pay 1.0916USD if he wants to buy 1 EUR. On the other hand, the trader can sell 1 EUR for 1.0916 USD.
The prices of currencies come as four decimal places. This is because of the difference in spread. Currency trading can worth millions of dollars in the Forex market. This means that the spread can add up to something significant. The spread represents the difference between ask-price and bid-price. While the above is possible, also note that the trader can take a huge loss from the small spread. A good Forex trader will always be aware of the risk when trading.
Before you venture into Forex trading UK, you need to know certain terminologies. An important one among them is “position”. A position in Forex trading is the trade you enter. There are two types of positions: they are:
- A long position
- A short position
A long position is also the same as a buy position. A trader opens a long position when he speculates that the value of that currency pair will increase. When the trader gets out of that position, we say that the position is “closed”. A trade does not complete until a position closes.
A short position is the same as a sell position. A trader opens a short position when he speculates that the value of the asset will fall or decrease. The trader will then buy that pair back when the value finally decreases as speculated. When he buys it back, it means he closes the trade. The trade does not complete until it is closed.
It is a form of Forex trading involving the buying and selling of real currencies. The trader purchases a particular amount of currency and changes it for another currency. He waits until the value of the currency he bought increases and changes the other currency to the one he bought earlier. As a result, he will get more money compared to what he spent initially.
CFD is the acronym for Contract for Difference. It is a contract representing the price movement of a given financial instrument. In this case, the trader does not need to own the asset before trading with it. All he needs to do is to make money from the increase and decrease in the value of the asset. You can use CFD to trade the following markets:
You only need to trade in the price movements of the instruments. You will not need to buy any of them or stock them up.
A pip represents the base unit of the price of a given currency pair. It is also the 0.0001 of the quoted price; this refers to non-JPG pairs. If the bid price of EUR/USD changes from 1.1587 to 1.15897, it represents a change of 1 pip.
You can also call it the pip spread. It stands for the difference between the sales price and the purchase price of a currency pair. The spread is usually low in the popular currency pairs. This is why virtually all the major currency pairs have a low spread. The spread can even be lower than 1 pip at times. On the other hand, the spread tends to be higher in those pairs that are not popular. This is because trading does not occur often. The market needs to record a movement higher than the pip spread for you to get a profit. The EUR/USD is the most popular currency pair and its pip spread is about the lowest.
This is the money the broker retains in your trading account when you open a trade. Many of the average Forex traders lack the funds or margin to trade high volume. So, Forex brokers offer leverage to cover up. Leverage is money that the broker lends the trader to enable him to control large trading positions.
Every trader needs to understand what leverage stands for. Leverage is the capital the broker provides to increase the trade volume of the Forex trader. Leverage can help to increase your profit margin and can also increase your loss. So, you must use it with care. Many brokers offer a negative balance policy automatically. This means that you will not be owning the broker any money if your trading balance goes below zero. This is one service you can get from many regulated brokers. The negative balance policy ensures that your trading account will never go below zero. The broker will automatically close the trade if your balance cannot sustain it. So, you will never own the broker any money.
Price and quote
You will see Bid and Ask price below each currency pair on trading platforms. What do they mean?
- The bid-price represents the price at which the trader can sell the currency pair.
- The ask-price represents the price at which the trader can buy the currency pair.
The trader can buy and sell in Forex trading UK. This means that you can buy when you speculate that the price of the currency pair will rise. On the flip side, you can sell when you decide that the value of the currency pair will fall. You need to tread with caution and get things right before you buy or sell in Forex trading.
A long tare is the same thing as a buy trade. The trader buys if his strategy tells him that the value of a particular asset will rise. So, he will buy that asset so that he can make a profit from the difference in value. The difference here refers to the difference between the price at entry and exit.
Another name for a short trade is a sell trade. The trader sells a currency pair if he believes that the value of the pair will fall. So, he will make a profit from the difference in values. The current exchange rate can determine the price at which an asset trades. It can also depend on the amount of the second currency obtainable as an exchange.
The most common currency pairs
There are so many currency pairs in Forex trading. Experts categorize them into four, which are:
- Major currency pairs
- Minor currency pairs.
- Crosses currency pairs
- Exotic currency pairs
Check below for their specific features
Major currency pairs
The major ones are 7 in number. They are called Major currency pairs because they are the most traded. Their liquidity is very high and this is why they are the most traded. Studies show that the major currency pairs take up about 80% of trading activities in the Forex market. Their volatility is low and their liquidity is high. The currencies in the major pairs are from well-managed, stable economies. Manipulation is also not common in such economics. The spreads in the major currency pairs are small also.
The crosses currency pairs and pairs that do not include the USD. Before now, the crosses would first be converted to the USD and then to the currency of choice. Things are different these days, however. The crosses are now available for direct exchange. The most common ones among the crosses currency pairs are:
The liquidity is very low and their volatility is high
Exotic currency pairs
They belong to emerging markets or smaller economies. Currencies from these smaller economies are in pair with major currencies to form exotic currency pairs. Trading exotic currency pairs are riskier than trading any other currency pair. This is because their liquidity is low and their volatility is high. Manipulation is also a possibility.
Furthermore, the spread in the currency pairs is wider. You can expect them to respond markedly to changes in financial and political developments.
The seven major currency pairs are:
The monitor currency pairs are six in number and they are:
Some examples of exotic currency pairs are:
Before you venture into Forex trading UK, you need a good understanding of the Forex chart. A Forex chart can be presented in the following ways:
- Bar chart
- Line chart
The most commonly used among them is the candlestick chart. You can also call it the Japanese candlestick chart. Each candlestick gives the trader loads of information about the particular currency pair. It can give you the following information.
- The high price
- The low price
- The opening price
- The closing price
The information depends on what is happening in that particular time frame. The three major points you will get from a candlestick are open. Close and wicks. The wick indicates the high and low ranges of the price in that particular time frame. The wick is usually below and above the real body of the candlestick. The real body will help the trader to know if the price is higher or lower than its opening price. The price moved higher or lower if the real body is filled. The price closes at the same point where it opens I the real body has no filling.
A bar chart is also popular. It gives some helpful trading information. Be that as it may, it does not give as much detail as a candlestick. The bar chart will show you the following information:
- Opening price
- Close price
- High price
- Low price
The topmost part of the bar shows the highest price and the bottom part shows the lowest price in that particular timeframe. The bar itself shows the overall trading range of the currency pair in question. You will see a horizontal bar on either side of the bar. The horizontal bar on the left side indicates the opening price. On the other hand, the horizontal bar on the right side indicates the closing price. The main use of a bar chart is in the identification of the expansion and contraction of the price range.
The line chart is not difficult to understand at all. As a beginner, you will even find it easy to use. The line chart represents a line that joins the closing prices in a timeframe. It represents the general movement of the price of a given currency pair all through a timeframe. It also shoes the currency patterns.
How to start Forex trading with brokers
A broker is an intermediary between the liquidity provider and the trader or investor. You need to learn all you can about brokers before you pick one. This is why Forex365 has put together this helpful information to guide you. The purpose of the broker is to facilitate the execution of orders placed by the trader.
When looking for a broker to register with, you should find out if the broker has a license to operate. You should also find out if the broker is under the regulation o regulatory bodies. Some experts think you should look for a broker that has a minimum of 5 years’ experience. The best way to know if a broker is legitimate is to find out if it abides by regulatory rules. Only a broker that abides by regulatory rules will last up to 5 years in business. You should also read up reviews about the broker before you register there to trade Forex.
You will need to register an account with the broker before you can start trading. After you have done that, you will need to make a deposit. You can start with the minimum deposit to test what the broker offers.
You cannot become a successful trader overnight Forex trading UK. It is a gradual process. There are so many things you need to learn before you can become successful. You should also not even think of trading until you have learned everything you need to learn. The Forex market is dynamic and this is why you need to learn everything you can to become successful. Even after you start trading, the learning does not stop. Learning in Forex trading UK is a continuous process. The day you stop learning is the day you start losing.
Forex trading UK platforms
Aside from what we already discussed above, you also need to know about the various trading platforms available. What is a Forex trading platform? It is an online program that makes it possible for the Forex trader or investor to get access to the Forex market. You can use a trading platform it manages, open, or close a trade. You can make trading decisions using a series of tools available on the trading platform. A trading platform will also contain so many tools and indicators. You will also be able to access the market on various timeframes. This way, you can see how the timeframe affects price movement. Trading platforms make it easy for you to analyze and monitor the Forex market in real-time.
There are different types of Forex trading UK platforms. The most popular one among them is the MT4 and MT5 trading platforms. MT4 stands for MetaTrader 4 and MT5 stands for MetaTrader 5. You can access these trading platforms on both your desktop computer and mobile devices. You can easily download and use them from your Android and iOS operating systems.
You can also call I MT4 as we mentioned earlier. It will give you access to a series of markets and assets. You will also be able to access various finical instruments, some of which are:
- Foreign exchange (Forex)
All the tools you need for managing your trades are accessible on the MT4 trading platform. It is also free to use. You can download it on your mobile device or PC for free.
Additionally, the MT4 trading platform is very easy to use and understand. The charts are interactive and it enables the trader to monitor his trade in real-time. The trading platform also gives you over 30 technical indicators for free. You can use them to make trading decisions. The technical indicators will help you to determine the possible market direction. You can also use them to determine the entry and exit prices when trading. An MT4 trading platform is more popular than an MT5 trading platform.
You can also call it the MT5 trading platform. It is the newest of all trading platforms out there today. It is also the most advanced of them all. You can download it for free on your devices. You can use it on your PC, android, and iOS operating systems. The MT5 trading platform offers more than what you can get in the MT4 trading platform. Some of the assets and markets it covers are:
It has a diverse functionality which makes it stand out from others. It will also give you access to many tools for fundamental and technical analysis. Those who have an interest in copy trading can also access tools for that on the MT5 trading platform. It equally supports automated trading. You will access the best instruments and tools for trading on the MT5 trading platform. Check below for more of the benefits of using the MT5 trading platform:
- Multi-threaded strategy tester.
- Easy fun transfer between two accounts.
- An alert system to inform you about happenings in different markets.
- Easy communication among traders via the MQL5 community. The link to the MQL5 community comes with the MT5 trading platform. Communication enables traders to communicate with each other and share helpful trading tips.
Best trading systems
The major entities involved in Forex trading are:
These individuals use different types of strategies got trading Forex and you too can adopt any of these strategies. We will discuss some of the strategies available below:
This is a short term Forex trading UK strategy. The trader using this strategy will open a trade and closed it fast once the trade is in profit. The time spent per trade rarely lasts more than just a few hours. Trades can even last for only a few seconds. The strategy is practical. The trader using this strategy will make many trades with each of the recording small profits. He looks to accumulating the small profits to become big over time.
This strategy is somewhat conservative. It is one of the best for a beginner in Forex trading. A trader using this strategy will make trading decisions using the 4H timeframe or 1H timeframe. He can leave the trade open for one to four hours before closing it. Such traders focus on the main sessions of the Forex market.
This is a medium-term trading strategy in the Forex market. The trader has his focus on larger timeframes. He makes a trading decision based on large price movements. Such a trader can leave his trade open for some days or even weeks. If Forex trading is a complement to your daily work, then this strategy will be good for you.
How to choose a good trading platform
There are so many Forex brokers out there today and they all claim to be reliable. However, you should not take their words for it. Rather, you should investigate them first to know if they are reliable or not. Check below for tips on how to choose a reliable Forex broker.
Consider trust level
Before you pitch your tent with a Forex broker, find out if the broker is trustworthy or not. This is where you need to read reviews about the Forex broker. The reviews will give you an idea about how trustworthy that broker is. When reading the reviews, make sure you focus on information from reliable sources only. This will help you to get the true picture of how reliable that broker is.
One other very important thing you must bear in mind when choosing a Forex broker is the security of the site. Check if your fund will be safe on that broker’s platform. Check if any customer had ever complained about the disappearance of funds before. Also, check if nothing will go wrong with your personal information. Do not forget to find out how the broker plans to use the personal information you submit to the site.
A good broker will not join your funds to that of the company. Rather, the broker will separate the funds of its customers from the company account. Only register with a broker that can help to protect your account.
The issue of security does not end with the broker; you too have a role to play. For example, you must protect your login details always. Make sure that you do not access your account on a device that you share with someone else.
Complete access to your account
A good broker will give you full access to your trading account. This way, you will have the freedom to access and use the account as you deem fit. You should avoid that broker if you need to ask the broker to manage your account for you.
Access to a demo account
Find out if the broker offers its customers a demo account. If this is not the case, then you should steer clear of that broker. The demo account must be available for free also and you should not be asked to fund your account before you can access a demo account.
Sources of information for Forex trading
As we have mentioned earlier, learning is a continuous thing in Forex trading UK. You just canto do without learning and you must learn everything you can. This is the online way via which you can become a successful Forex trader. There are so many sources of information out there today that can help you improve your trading skills.
You can always trust our website for helpful information about trading. Forex365 is set up to help you improve your skill so that you can overturn the continuous losses you experience. We provide you with up to date information that can make you a better Forex trader. Aside from our platform, you can also get helpful knowledge from several other sources. We provide our visitors with a series of educational resources and we also offer them in easy to understand languages. Are you a beginner in Forex trading or you are an expert? You will always find our website to be a reliable source of information. We capture all categories of traders in our educational services.
Some of the ways to learn about Forex trading UK is to participate in free webinars and read e-books. You can also read articles and so on. You can trust us for all these services to help you become a better trader just as you desire. If you want to learn about Forex trading from experts, there is no better place to visit than our site.