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Forex Trading

Forex Trading

A guide to forex trading including a comparison of the key financial markets and where you can trade:

Where Can I Open a Forex Trading Account?

Many spread trading companies provide access to thousands of international markets including a wide variety of major, minor and exotic forex spread trading markets.

Some firms, such as FinancialSpreads, provide the usual benefits of spread trading such as 24 hour trading, no commissions, no broker’s fees and tax free trading*.

Typical In-Hours Spread Sizes

EUR / USD Daily 0.7 1 0.7 0.7
GBP / USD Daily 1 1.5 0.9 0.9
EUR / GBP Daily 0.8 1.3 1.5 0.9
USD / JPY Daily 0.8 1 0.9 0.7
Forex - Minimum Stake £1 £1 £0.5 £1
Comparison Notes.

Benefits of Forex Spread Trading

  • The simple range of markets makes spread trading an option that investors should consider. Most spread trading companies offer the popular forex pairs as well as a variety of other markets that can span from shares and stock market indices all the way to commodities like Gold, Oil and Coffee.

  • In contrast with more traditional share trading, you can take short positions on a market. As a result, if you think the Euro/Dollar rate will go up then you can speculate on it to move higher. Conversely, if your research makes you think that the Euro/Sterling rate is going to weaken then you can speculate on the market to go down.

  • You don’t buy or sell any actual currency, assets or resources; you simply speculate on the future value of a given market. As a result, forex spread trading is not subject to capital gains, stamp duty or income tax*.

  • If you speculate on forex then you usually have to pay commissions. With forex spread trading, your trades do not incur any such fees.

Forex Options

The forex options let investors:
  • Seek profits in rising or falling markets
  • Gauge the riskiness of a possible option while potentially protecting earnings
  • Hedge new or existing positions

Trading Forex Options

An option is a contract between a buyer and seller for the right to buy or sell an underlying market at a set price on a given date. With forex options, the underlying market is a currency rate.

GFT now offer forex options via their DealBook trading platform.

Investors can trade calls and puts on ten forex pairs. In the forex options module, the New Order window supports several common trading strategies, including verticals, straddles, strangles and risk reversals.

Forex options with GFT are settled in the European-style; ie ’in-the-money’ options are automatically exercised as a position.

When spread trading betting, trading forex or CFDs note that it is possible to lose more than your initial deposit.

Where Can I Find Forex Trading Charts?

If you are looking for historical data then companies like Financial Spreads offer a range of live charting tools including candlestick charts where you can apply a variety of moving averages as well as Bollinger bands.

You are able to alter the charts to see the data over various time scales including minutes, hours, days or even weeks in order to show the market movements over a time period to suit your investment style.

For a real-time chart see: live forex charts.

Example forex chart

Forex Trading Guide - Example Chart

Forex Trading Companies – Account Services Comparison

All of the companies listed below offer the normal benefits of spread trading such as a wide range of markets, two way trading, tax free trading* and zero commissions.

User Ratings 7.6 6.6 6.7 7.1
Web Platform Spread Betting Accounts Spread Betting Accounts Spread Betting Accounts Spread Betting Accounts
iPhone App iPhone App iPhone App iPhone App iPhone App
iPad App iPad App iPad App iPad App iPad App
Android Apps Android Apps Android Apps Android Apps Android Apps
24 Hour Trading 24 Hour Trading with Financial Spreads 24 Hour Trading with City Index 24 Hour Trading with ETX Capital 24 Hour Trading with CMC Markets
Live Charts Financial Spreads City Index ETX Capital CMC Markets
Stop Loss Available Financial Spreads Stop Loss Orders City Index Stop Loss Orders ETX Capital Stop Loss Orders CMC Markets Stop Loss Orders
Automatic Stop Loss Automatic Stop Loss on Financial Spreads Trades Automatic Stop Loss on City Index Trades Automatic Stop Loss on ETX Capital Trades Automatic Stop Loss on CMC Markets Trades
Deposit Account Financial Spreads Deposit Accounts City Index Deposit Accounts ETX Capital Deposit Accounts CMC Markets Deposit Accounts
Credit Account Financial Spreads Credit Accounts City Index Credit Accounts ETX Capital Credit Accounts CMC Markets Credit Accounts
FCA Authorised and Regulated Financial Spreads City Index ETX Capital CMC Markets
Comparison Notes.

Forex Trading and Risk Management

Before we proceed it should be pointed out that, as with all forms of investment, there is a downside to spread trading and you can lose more than your initial stake.

You might find it helpful to note a few other points which the following risk notice covers, "Please ensure that spread trading matches your investment requirements. Familiarise yourself with the risks that are involved. Spread trades do carry a high level of risk to your capital. If necessary, seek independent advice".

That said, you are able to add a limit to the size of your position which can reduce your losses without impacting your upside. You could also make use of smaller stake sizes such as £1 per point or $1 per point.

To gain some exposure you could trade the major forex pairs, ie speculate on whether the Euro/Dollar, Sterling/Dollar, Sterling/Euro etc will go up or down.

As a result you might decide to speculate on the Euro/Dollar and, as we have said, you can trade £1 per point or $1 per point etc. With the Euro/Dollar market a point is $0.0001.

If you decide to speculate that the Euro/Dollar will go up, with a £1 per point stake, and it goes up by $0.0120 then you would make $0.0120 x £1 per $0.0001 = 120 points x £1 per point = £120.

Note that you can trade the markets in Dollars, Sterling or Euros. If you want to trade in Euros then $0.0120 x €1 per $0.0001 = 120 points x €1 per point = €120.

Of course, should the market move against you, dropping by say $0.0090, then with a £1 stake you would lose $0.0090 x £1 per $0.0001 = 90 points x £1 per point = £90.

That would not be a great start. However, with spread trading companies like Shorts and Longs you can add a Guaranteed Stop Loss at let's say $0.0030, or 30 points.

If you were spread trading on the Euro/Dollar then your position would be closed if the Euro/Dollar moved against you by $0.0030. Therefore, instead of losing £90, you'd only lose $0.0030 x £1 per $0.0001 = 30 points x £1 per point = £30.

Of course, if you correctly predicted the direction of the market then your profit would still be £120 if it moved up by $0.0120 or £60 if the Euro/Dollar moved up by $0.0060.

For some fully worked forex spread trading examples please also see:

Financial Spreads » "With you get all the advantages of
Spread Trading as well as commission free CFD Trading on 2,500+ markets, 24 hour trading, professional level charts and..." read Financial Spreads review.

Forex Trading - 11 July 2016

Date Trading Update

For more see our 'latest forex trading reports'.

Readers please note:

Trading Risk Warning
'Forex Trading' edited by DB, updated 11-Jul-16

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