Among the many financial markets that exist worldwide, the Forex market is the largest of all. The Forex market is where different currencies are traded with each other, with daily transactions often exceeding US $ 4 trillion. The main participants in currency markets are central and commercial banks, hedge funds and multinational corporations. However, the Forex market is the easiest financial market to access as a retail trader, on a desktop or mobile device, and with only a small amount of investment capital. Unlike the ‘big players’, who invest millions in Forex trading, retail traders can start with limited funds and without any prior trading experience. They just need to select a Forex broker, preferably from regulated CFD brokers and make an initial deposit indicated in the trading account details. In our experience, regulated CFD brokers stipulate a starting balance of around $ 100 in a normal trading account, but the amount varies depending on the type of account and the benefits provided to clients. However, there are beginner Forex brokers offering micro accounts with deposits starting at $ 1, giving novice traders the opportunity to ‘test the waters’ before taking the plunge with bigger investments and riskier trading positions.
Do retail forex traders need huge amounts of investment capital to trade?
If retail clients could only invest their own capital in currency trading, the potential for valuable profit would be limited to very wealthy investors. However, the best Forex brokers offer marginal trading and leverage to their clients as part of the online trading package. Leverage allows Forex traders to control more of the market without investing all of the capital. Typically, the amount of leverage available on the Forex trading platform ranges from 1:25 to 1: 500. While we have seen regulated CFD brokers offering from 1: 1000 to 1: 2000, trade at this level of This relationship can be very risky and inexperienced traders should avoid it. In particular, the ratio of leverage offered may depend on the customer’s trading experience and the type of trading account. The best Forex brokers often ask clients to demonstrate their understanding of Forex trading by taking a simple test on the website. The test results decide the initial leverage ratio, which can increase as clients gain trading experience. Successful leveraged trades generate higher investment returns for traders than if they had traded using only the funds in their trading account.
However, leveraged trades can backfire when unsuccessful trades occur, as potential losses are greatly amplified. However, the best Forex brokers generally protect their clients from catastrophic losses by providing limiting features such as ‘Stop Loss’ settings and pre-set margin calls on the platform. In our experience, entry-level Forex brokers and regulated CFD brokers take special care to integrate negative balance protection into their trading platforms.
Advantages of currency trading
The Forex market offers endless trading opportunities to traders, especially when the markets are very volatile. Because currency trading involves predicting the price movements of currencies against each other, the depreciation of one currency means the appreciation of another. Furthermore, the global Forex markets are open 24 hours a day from Monday to Friday with the Asian, European and Asian market sessions one after the other due to different time zones. The best Forex brokers provide support for as long as the markets are open. In our experience, Forex brokers for beginners and more experienced traders offer demo accounts to practice trading, as well as free educational training courses on their websites. Importantly, regulated CFD brokers are typically ECN (Electronic Communication Network) brokers linking smaller investors with liquidity providers in the currency markets. ECN brokers do not trade against their clients, but are interested in their clients’ earnings as they earn commissions on those earnings.
Automated Forex Trading
The best Forex brokers usually offer automated trading on their trading platforms. With financial markets affected by multiple variables, it is very exhausting for traders to sit at their desks for hours on end trying to understand the Forex market. Automated trading is possible through the use of Forex robots that analyze market movements and generate predictions through trading signals on the platform or even on traders’ mobile devices via SMS. Traders can decide to act on the signals themselves or use the signals to execute Forex trades automatically. Automated trading with signals is especially useful for inexperienced traders and can potentially increase investment returns substantially.
