What’s behind the growth in forex trading?
Dollars in front of a monitor with a price chart. Forex and trading. Close up.
Forex, or foreign currency exchange, is a global marketplace for trading currencies, allowing traders to make profits on currency fluctuations. It is the world’s largest and most liquid market, with millions of traders from all over the world. With immense profit potential, forex trading has become the most popular, but also the one of the most volatile markets. What is behind this growth?
Introduction to forex trading
When trading forex, the trader is speculating on the price of a specific currency going up or down. Most forex trades are done in pairs, with one currency against the other. For example, one of the most popular forex pairs is EUR/USD, placing the euro against the dollar.
Forex trading can be easily performed with spread betting or CFD trading. Start by creating an account with a trading platform that allows making trades using forex. Make sure you do your research properly and find a forex pair that is profitable to trade. Keep watching the market for any significant moves and find the right moment to place your position. You can decide to buy and go long if you think the value will rise, or go short and sell if you think it will decrease.
Pros and cons of trading forex
Forex offers easy and accessible online trading on a variety of platforms, many offering advanced tools for planning and analysis. Real-time market price tracking, charts, and professional advice can often be found on reputable forex trading platforms, and the market is open 24 hours a day, 5 days a week.
With access to leverage, you can increase your profit potential without having to spend more funds on your positions. In the United Kingdom, you can trade with leverage up to 1:30, which means you only need to pay about 3% of the full trade value up front.
There are risks involved in forex trading as well – it is one of the most volatile markets, creating many opportunities for profits, but with a high risk of making losses. Since the forex market is an OTC (over-the-counter) market, there is no centralised exchange. When trading FX, always go with a reputable platform with a long history of good trading practices.
What caused forex to spike in popularity?
The main reason for forex becoming the most popular market for traders all over the world is due to how easy it is to access trading. FX trading can be done fully online, and it only takes a couple of minutes and a small deposit to start trading. It’s also open day and night, making trading very profitable for those who have the ability to monitor the market fluctuations as they happen.
When trading forex, you don’t need to own assets to trade them. With methods such as CFD trading or spread betting, you can avoid Stamp Duty and Capital Gains Tax (CGT) in the United Kingdom. This also contributed to forex’s popularity, making it more affordable and increasing profit potential. Find out more about spread betting and CFDs on forex in the Business Income Manual provided by HM Revenue & Customs.
Finding the right forex platform for beginners
MetaTrader 4 is the world’s most popular platform for currency trading, with plenty of features and a user-friendly interface. MT4 is a beginner friendly app, with intuitive design and analytical tools to help make market speculations. It also features an automated trading functionality, allowing you to set up algorithms which perform transactions without your input.
Downloading the MT4 platform with CMC Markets enables you to trade using derivatives such as spread bets and CFDs on Windows or Mac through both desktop and mobile.