In comparison to trading stocks, trading foreign currencies (Forex trading) has some key advantages. Eight reasons why you should try FX trading are listed below.

1. Forex Trading – 24 Hours per Day

Stocks are trades in stock exchanges. These stock exchanges are only open during normal working hours, usually from 9 am to 5 pm.

Forex trading is different: During almost six days a week you can trade currency pairs around the clock. So it is completely up to you when you want to “work” as a FX trader. In theory you can do this around the clock. You can do this in the morning (before going to work in your corporate job) or in the evening after your normal job. Or – if you make your money as a FX trader – you can work whenever you want.

The trading volume is, however, not equally distributed over the course of a day. It is obvious that currency pairs that for example include the Yen are primarily traded at times at which Japanese traders are active – ie, in the early hours of the morning European time or during night in US time.

In theory, you don’t need sit at your PC. The Forex broker AvaTrade for example supports Metatrader, a trading software that trades automatically.

Click here to learn trading automatically!

2. Forex Trading – Anywhere

In order to trade FX, all you need is a device with internet access. Therefore, you can virtually trade from everywhere foreign currencies: at home in your office, at home in the living room, at home on the balcony, in your corporate office, or even from the beach during your stay in the Bahamas. And with a web trading software, you can trade from your mobile device with Windows Mobile or from your iPhone from every spot in the world where you have a mobile data connection. The established Forex broker Forexyard has developed an iPhone app, try it out now!

3. Liquidity in the FX Market

The market for foreign currencies is the most liquid market in the world. This means that in a fraction of second, buyers and sellers are matched with each other. If you want to trade stocks of a small listed company, the daily volume (the number of shares traded each day) is small. In the Forex market, liquidity is extremely large, as the daily trading volume is over 4 trillion U.S. dollars.

Due to the size of the market, there are in addition to the liquidity two other big advantages: low risk of price manipulation and minimal costs of trading. Due to the liquidity and size of the market, price manipulations by some market participants are almost impossible. You would need huge sums to manipulate foreign exchange rates. And because the market is so large spreads between buying and selling rates are extremely small. The more liquid a market is, the lower costs for trading are. And the lower the costs for trading are, the less the price must move in order to achieve a profit.

4. No Commissions in Forex Trading

In contrast to trading stocks, you do not have to pay commissions when buying or selling currencies with a Forex broker. The only “costs” that arise is the spread. The small difference between the buy and sell price (the bid-ask spread) is what your FX broker earns from you with every trade you make. The spreads for the most traded currency pairs are very low and are usually less than 5 pips – see our comparison table of FX broker spreads for more information. InstaForex only charges a spread of 3 pips on all major currency pairs.

Click here to open an InstaForex account in order to trade with low spread

5. Leverage in Forex

With the use of leverage you can achieve great gains (or losses!) with very small investments. Common leverages range in Forex trading range from 1:50 to 1:1000. Most FX brokers offer a leverage of 1:200 on the most traded currency pair EUR/USD. A leverage of 1:200 means that you can move $200 by investing only $1. Or trade with $100,000 by investing only $500. If your currency pair increases by half a percent, then you double your investment to $1,000. Using leverage allows you to move huge amounts of money by investing only a small fraction of money. The greater the leverage, the lower the price movements must be in order to make a profit. And the greater the leverage, the lower the margin requirements are. With a leverage of 1:200, the margin is 0.5%. In the example above, this is just $500. However, once your position has dropped by $500 to $99,500, your position will usually automatically be sold because it is no longer covered by your margin.

With a maximum leverage of 1:1000 InstaForex offers the greatest opportunities: have a look at InstaForex now.

6. Earning money with Forex money in falling markets

If you buy stocks you speculate that they will increase in value. This is going to make you money. The performance of individual stocks is heavily dependent on the performance of the overall market. The correlation is usually greater than zero (positive correlation) and in similar and strongly connected markets (like the markets in the European Union) even close to one. In an economic downturn it is therefore pretty difficult to earn money when buying stocks.

The Forex market is in this respect completely different. You are trading a currency pair, for example Euro against the Yen. You have to consider only how the two currencies will develop against each other: Which currency will appreciate against the other currency? And which currency will depreciate? If you think that the Euro will decline against the Yen, then sell Euro (go short in Euro) and buy Yen to (go long in Yen). When your forecast was correct, you’ve earned money: the Yen you bought are now worth more than before.

If there were not spreads, FX Trading would be a complete zero-sum game: What the buyer of a currency pair wins (loses), his counterparty loses (wins) automatically. When buying shares, this is usually different: an investor establishes a strategic equity ratio and then selects stocks to reach this quota. In rising markets, he will achieve gains – the question is only whether he achieves the maximum profits with the given risks he took.

7. Forex Trading: Simple yet Complex

The Forex market seems to be very simple at first glance. Most of the trading volume is traded in a few currencies and currency pairs. The most important currency pair is USD/EUR. But the exchange rates themselves are determined through a variety of factors that ultimately influence the supply and demand for a particular currency. If the demand for a currency increases, its prices will increase until supply and demand are back in balance. This process occurs in the ultra-liquid Forex market almost every second. Without high-speed Internet access and automated trading programs, it is difficult for a casual trader to compete with professional traders: the FX market is simply more complex than it appears at first sight and it requires a lot of knowledge, time, skill and responsiveness to earn a living as a Forex trader.

8. Forex Professional Software for Private Traders

Professional tools for FX traders, however, are already widespread. And even the standard trading software or trading through a Web browser allow the use of charts and other analysis tools. Big advantages to limit losses are automatic stop-loss orders and orders to take profits when the price has risen enough.

Start trading Forex now!
Here is an overview and a comparison of the best Forex Brokers!

The global foreign exchange market (Forex) is the most liquid and the most transparent market in the world. But while the Forex trading market is very transparent, most Forex brokers are not transparent. Only very few of the publish data about themselves. You will rarely find a FX broker that publishes the number of active Forex traders or the number of new clients acquired during the past three months.

A quick note: eToro is one of the largest Forex brokers and you can’t do anything wrong when you trade at eToro. Just click here to register for free at one of the largest brokers!

So there is no easy way to find out which FX brokers are large and which ones are rather small. But this would be interesting to know. One could say that the larger a FX broker is, the better the services it provides. You can look at each customer being a “vote” for that FX broker. So the more traders a FX broker has, the better it must be. We cannot say that the largest forex broker is automatically the best FX broker. But size is a good indication for the quality of a broker. Furthermore, Forex brokers with a huge client base must have been active in the market already for a long time – otherwise they would not have reached that size. So you can assume that their trading software is stable and advanced (the FX broker has had enough time for the development and improvement of the trading software). And you can also assume that this FX broker will remain active in the market for a long time. So choosing a big Forex broker increases that chances of trading with an established and reputable broker where you will still be able to trade FX or CFD in two or three years.

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Programs and tools such as the Metatrader are extremely popular among online FX traders. With a program such as MT4 or MT5, you can create automated trading systems, which then directly and automatically trade foreign currencies online. Metatrader is probably the most popular automated FX trading system. Its popularity is one of the reasons why some of the best Forex brokers support this automated trading system.

But how does the Metatrader work? This online trading software was developed in 2000. While previously only professionals used this trading software, now an increasing number of amateur traders use MT4 and MT5. Meanwhile, there are also plenty of tips, extensive manuals and free videos with instructions on how to use Metatrader and its programming language MQL.

The Metatrader software can be used in several ways. As an “Expert Advisor” the software uses the experience of other traders and provides tips on when it is best to enter into a trade or when to close a position. With the “Custom Indicators” you can enter your own experiences into Metatrader, so that it generates specific tips for your own Forex trading strategy.

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Many Forex brokers offer – in addition to trading foreign currencies – CFD (Contracts for Difference). In this article, we will explain you how CFD work and tell you the advantages and disadvantages of trading CFD.

How CFD (Contracts for Difference) Work

When you buy an option you have the right to buy the underlying stock (eg, Vodafone’s shares) at a specified price (you are “long” and have a call option) or to sell the stock at a certain price (you are “short” and have a put option).

With a Contract for Difference (CFD), in contrast to stock options, you only deal with the difference in the price of the underlying value. Unlike options, CFDs don’t have an expiry date. Accordingly, there is no time value in CFD: the prices of CFD are moving in parallel to the underlying value.

As with Forex, CFD can be bought on margin, i.e. with a leverage. This opens up the field for huge profit opportunities, either when you are “long” and you speculate on rising prices, or if you are “short” and speculate on falling prices. The risks are correspondingly enormous as well: if the value of the CFDs is not covered by your margin anymore, then the FX broker usually closes the position and you lose your invested capital completely.

CFD Example

You buy a CFD on 10,000 Vodafone shares. The stock price is currently € 2.00 per share. The leverage is 20:1 and you invest € 3,000. So you speculate with Vodafone shares worth € 60,000 (€ 20 x 3,000), equivalent to 30,000 stocks. If the price of Vodafone shares increases on the same day by 1.5% to 2.03, then you have generated a profit of 30,000 x 0.03 = € 900. You can also calculate the profit by multiplying the invested capital, leverage and price increase as follows: 3,000 x 20 x 1.5% = € 900.

Note that your invested capital of € 3,000 is lost if the Vodafone share decreases by 5%. The use of stop-loss orders is therefore usually a recommended tool to limit you losses.

With most Forex brokers you can trade CFD without having to pay a commission. As with Forex trading you pay the fees indirectly with the spread. The spread is the difference between the bid (buying) and ask (selling) price for a CFD. If you hold a CFD overnight, then you will also have to pay a “rollover charge” (interest).

CFD Advantages and disadvantages

As a trader you can go long or short. So you can earn money with increasing and decreasing stock prices.

Thanks to the leverage you can use much less capital to earn money with CFD than when you buy the stock. Typical margins on CFDs range from 1:10 to 1:100. Note that the larger the leverage, the higher the risk of a total loss generally is. If the FX broker automatically closes the position when the margin is used up, then the downside risk is limited to the invested capital. CFDs have – as opposed to options – no time value.

The costs for CFD trading are relatively low. You don’t have to pay a commission to your Forex broker, the only “cost” is the spread between the buying price and selling price of the CFD.

Transparency: Because CFD are tied to a real value, the price movement of CFD transparent and easily understandable.

Offerings: In addition to individual stocks also indices and commodities like oil and precious metals can be traded online. CFD are usually only available for liquid and often traded underlying values, such as the stocks of companies that are represented in the NYSE.

Risk: Due to the leverage effect, the risk of a total loss with CFD is huge. Before you start trading CFD with real money, you should understand this financial instrument and its risks.

Tip: Open a free demo practice account with AvaTrade to get more familiar with CFD without risking any real money!

This is an overview of the most important criteria when choosing a Forex broker.

Safety and Reliability

The most important points in choosing a broker are security, safety and reliability of the Forex broker. The best FX broker and the highest bonus make nothing if you cannot cash out your winnings.

How to determine if a FX broker has high levels of security and integrity? Check out these main criteria:

• Since when is the Forex broker active on the market? Is it for five years or longer active in the market or has the company just been established recently?
• Is the FX broker controlled by the regulatory authority of its country? Secure Forex trading providers mention this on their website (usually in the “about us” section)
• Is it easy to withdraw money from the Forex account? Deposits can be done quickly with all Forex brokers, and also with various deposit methods. Withdrawing money is usually a bit more difficult. At least with some brokers problems with withdrawing funds have been reported. It is best to have a look at the results in a search engine by searching for these keywords, combined with the number for the current year

Transaction Costs – Low Spreads

A second important issue is transaction costs. When trading currencies with a Forex broker, you do not have to pay any commissions. However, the broker earns money by applying a spread: the company sells you a currency pair for a higher price than it buys the currency pair from you. This means you buy foreign currencies at a higher rate than you can sell them. This is called the “spread”, the difference between the bid and ask price. Low spreads mean higher profits for you. Check and compare the spreads of various brokers for the currency pairs you want to trade. Reputable FX brokers have relatively low spreads: they want to earn money by attracting more customers instead of ripping of their traders with too high spreads.

Execution

The execution of Forex orders is important. If you click the “buy” button, you should be able to get the currency pair at the specified price. An exception can be when the market is very volatile. But otherwise, you should get the specified price for the currency pair when you buy or sell foreign currencies. If there is a long delay in the execution or if you regularly get a disadvantageous exchange rate (high when buying, low when selling), it is time to find a new Forex broker.

Software / FX Trading Platform

You must feel comfortable with the trading platform of your FX broker. Many FX brokers have developed their own software. Take a closer at the software of your broker by trading first with a demo account before depositing real money. Alternatively, you can choose a broker that supports Metatrader (MT4 or MT5). In this case, you are not limited to the trading platform of your broker.

Customer Service and Support

Also customer service is important – at least if you are a trader who frequently contacts the customer service department of a Forex broker. It is important that the customer service is available 24 hours a day during at least five to six days per week. Some FX brokers have a toll free number, or offer a free callback through a call center agent. An excellent option that some brokers offer is the “live chat” feature, where you can chat with a customer service employee if you need a short, quick answer. If you do not speak English fluently, you should also choose a broker that offers support in your first language.

Free Demo Account

Before you trade for real money with a new FX new broker, you should familiarize yourself with the software for a long time period with a free demo account. With a Forex demo account for example you receive $ 50,000 as “play money”, which you can use to trade under real conditions. Almost all FX brokers offer a demo account. Unfortunately, many of them offer only time-limited demo accounts, for example for 3 weeks. This is a short period of time, especially if you don’t have the time to trade foreign currencies daily. Consult our list with brokers which offer unlimited demo accounts.

You need to understand margin and leverage. These are two of the most important terms in Forex trading. The margin is the security that you must deposit with your broker for a foreign exchange trade. A margin of 0.5% means that you use a guarantee of 500 € when executing a trade for € 100,000.

The leverage is the reciprocal value of the margin. A margin of 0.5% equals a leverage of 200:1. When you buy and sell foreign currencies with a leverage of 200:1, it means that with 500 € in your Forex broker account you can trade 200 times that amount, ie 100,000 € in a Forex trade.

You might have already realized what a low margin respectively a high leverage imply: large potential gains and a high level of risk. Let’s look at an example.

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Forex Trading in Web browsers has many advantages. The two main ones are that you can trade anytime, anywhere with a computer with Internet access and that you don’t have to install any software. Forex Trading without download is particularly relevant if you are sitting on a corporate computer without administrator rights to install software such as trading platforms like Metatrader.

FX Trading in your browser can be as comfortable as Trading with a special program. It usually does not matter what browser you use to trade. The popular browsers like Internet Explorer, Mozilla Firefox, Opera and Chrome will be supported by all major Brokers.

Forex broker with trading in the browser without downloading

Here we present the largest Forex brokers where you can trade foreign currencies with your browser:

With eToro WebTrader you can trade currencies from all over the world from a PC connected to the Internet. The platform is simple, easy to use, offers all important functions and is very safe.

Finexo also offers a WebTrader where you can always log in using your browser, without any download. Even multiple languages are supported for Non-English speaking traders.

With easyMarkets you can trade MetaTrader and iPhone/iPad Apps and also directly in your browser using the easyMarkets webtrader. The browser version offers the same features like the downloadable version: You can trade in your browser with only one click, get live news from financial markets and the exchange rates communicated in real time.

Forexyard offers its own trading software which is available in two variants. On the one hand, a Windows-based version and also a software based on Java. If you select the JAVA-based Trading Platform, you don’t have to download any software and can start trading immediately.

Another recommendation is Plus500. Here you can trade with a Windos PC version via the browser and without downloading software. In addition to the popular web browsers such as IE, Firefox, Chrome and Safari, you can trade with the iPhone and iPad at Plus500.

Click here to enjoy webtrader based CFD trading – at Plus500!
CFD Service. Your capital is at risk.

Tradeview is a well-known forex broker and offers, in addition to MetaTrader also a mobile version for smartphones and iPhone/iPad Apps. Unfortunately there’s no pure browser based version for Tradeview Forex.

One of the most important criteria when choosing a Forex broke is the spread. The spread is the difference between the sale price and the purchase price of a currency pair and is measured in pips. A favorable spread for currency trading is very important because the spread directly affects how much profit you will achieve with your trades. The deeper the spread, the better for you. We have shown on the main page of our Forex broker comparison, only the spread of the most important currency pair in the world, USD / EUR. However, it may well be that you want to trade other currency pairs. We have listed the spreads for important currency pairs at our favorite Forex brokers in our table below. That makes it easier for you to decide which Forex broker to choose.

Forex Broker Spread table

Instaforex seems to be the best choice when it comes to low spreads. With an average spread of 3.0, InstaForex is significantly cheaper than the competition. To take advantage of the low spreads, you can register immediately at InstaForex.

(Spreads comparison of a currency against the U.S. dollar, exceptions indicated)

	EUR	GBP	JPY	CHF	CAD	AUD	EUR/CHF	EUR/GBP	Average
	3	3	3	3	3	3	3	3	3.0
	2	3	3	4	4	4	4	4	3.5
	3	4	3	4	4	4	4	3	3.6
	2	4	2	5	5	5	4	5	4.0
	3	5	4	4	5	4	4	4	4.1
	3	4	4	4	4	4	7	4	4.3

As you can see, the soft spreads vary widely. While the USD / EUR currency pair is usually the most favorable – a large proportion of foreign currency is traded in U.S. dollars and euros – there are big differences for other currency pairs at different brokers. Overall, the most expensive forex brokers are 1 pip more expensive for every currency pair than the cheapest brokers.

Especially when you trade currencies in very short time frames, the spread is significant. Therefore our advice: The shorter your holding period of a currency, the more important should the spread be for you when you have to decide for a certain Forex broker.