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Overview A brokerage firm acts as an intercessor between buyers and sellers in the financial markets. Their primary role is to facilitate the completion of…

Forex Trading for beginners

A foreign exchange market is a place of endless possibilities laced with securities and unmatched liquidities. The sum of collective transactions during 2019 in the world of forex amounted approximately 6.6 trillion US dollars on an average. It enjoys a daily transaction of USD 5.1 trillion.

The forex market is for those who want to exchange their currencies. They exchange it with other country’s currency either through OTC (over the counter) or through the means of the internet. Online brokers have the advantage of rendering quick services that saves time and money. Also, it is surrounded by security.

Ancient time of forex trading

Currency trading is nothing new when compared to today’s day and age. In the ancient age, there were money changers or exchangers who used to charge some amount as commission. It was during Biblical Times. The money changers also played the role of gold and silversmiths.

There was a monopoly of Byzantine government in the 4th AD on currency exchange. The exchange of money enabled people to buy and trade pottery, food, and raw materials from different nations and native places.

Enabling foreign trade

With the technology and global economic revolution or globalisation taking place rapidly, the world has reduced into a small place. International trades are blossoming quickly than ever before because of the information and technology kicking in.

Today, a trade does not only mean offering physical products, but a piece of information or software, which is a virtual product is the part of the trade. People from different countries are exchanging their knowledge voluntarily. They are paying charges converting the valuation of other nation’s currency. That’s the reason, payment houses and wallets like PayPal shot up in the picture, looking at the growing market of the forex.

Big industries involve trading, exchanging, selling and buying of currencies on a larger scale. They have commitments to meet and products to sell over the world. The forex trade is the part of their business deal and based on their exchanges; the currency pairs get traded. Economies of developed to underdeveloped nations depend on the exchange rate; directly or indirectly.

Even the internal federal structure, planning, growth rate and other big to small industries depend largely on forex reserves. So, commerce is synonymous to forex precisely.

How forex takes place?

The need for forex trade sprouts from the requirement of people and commodities they may require from a country other than theirs. For example, if a person living in the US, orders a medicine that is only available in the UK, then, in that case, the dollar would get converted into Pound Sterling.

The exchange would make a difference in the price of international currency exchanges. Likewise, such transactions continue daily, and larger volumes impact the currency price.

The country which pays for a product sees some loss in the fraction of the valuation of their currency. Also, the nation with more forex reserves cements the position as a powerhouse.


The forex market is an entirely decentralised bazaar of an array of currencies, which is independent of any pressures from a single country or authority. However, some certain principles and rules help in determining the rate of growth, profit and losses when a currency gets exchanged against the other.

Here, technology is the vehicle that enables the ride of exchanging different currencies without a physical location in place. Such methods are free from any authorisation from a bank. It happens through understanding between two parties. The transferring of money, a wealth of ownership of an entity takes place by arriving on mutual consent.

How to trade currencies?

Trading forex currencies if a sequential phenomenon, which requires knowledge of the financial market, access to technology, patience, e heart to bear frequent fluctuations and a gut that can chicken out mistakes.

Learning foreign exchange trading is not a day’s job. It seeks investment of outlook, guidance and keen monitoring of the financial market and geopolitical matters. After commanding over them, investing in funds is a matter of formality for people in forex markets.

The forex market has a speciality that it offers a twenty-four-hour non-stop duty to market players for five days. There’s an involvement of individuals, banks, and business network in pushing the market to trend in a different direction.

It also means the market is fluctuating for every second, thanks to enormous volumes and demand of different currencies. They compete against each other in terms of value through the means of supplies.

Forex working through financial institutions

Several financial institutions help the foreign exchange market to work efficiently. It operates on sundry levels. If monitored closely, one will find that banks turn themselves into financial firms called dealers. They have heavy involvement in trading foreign exchanges. Banks make for the most of all available dealers in the market.

Hence, the scenes which no one or a few people know that a bank is capable of pulling off are the interbank market. These trades may involve a hundred million dollars in a single transaction, which makes banks stand out from the ordinary dealer.

Due to the act or principle of sovereignty, these transactions meet lesser or no number of scrutiny from any country. The regulations here are null and void.

Assitance of foreign exchange markets

Forex markets are the biggest enabler of foreign trades in the world. They comply with currency conversions and allow investments. For examples, it offers permission and takes care of trading in other countries or between continents. If Japan chooses to initiate a trade with the US and imports goods, then the payment to the United States would happen in dollars.

There is a support of direct evaluation and speculation concerning the valuation of other country’s currencies.

Different ways of trading forex

Individuals, corporations, institutions and professionals largely carry out the forex trade in three different ways; the futures market, the spot market and the forwards market.

Out of these, the spot market has the best reputation among all traders. It is the underlying asset, and for real here. Both forwards and futures markets depend on it by large.

There was a time; the forwards market enjoyed the same popularity as the spot market. However, when the technology harped in, and new brokers began to show their might, traders from all walks of lives started to shift their base to the digital medium. It is hassle-free and quick. Although, individual traders could hold their assets for a longer time on the forwards market.

Today, the spot market is surging by leaps and bounds. It has even surpassed the preferred standard of the futures market for speculators and individual traders. Companies who are into hedging usually takes the route of forwards and futures.

Forex trading tips and steps

Before speculating and predicting the Fx market’s movement, it is imperative to know how steps of their trading unfold. Here are some essential tips, steps and ideas that can make your trades looks simple:

1. Select a currency pair

There are an array of pairs which offer selection to traders. Picking up the right pair makes a big difference in foreign exchange trading. The process demands guidance and research. Brokers like 101investing, Brokereo, InvestLite, TradedWell and others can do that for a trader.

It is advised that a beginner trader should study the volatility of the market that can help in risk management later on.

2. Choose the FX trade type

It is the next step after selecting the best pair in the stride. CFD and spread betting are premium service providers among a lot.

  • Know about the base currency and quote currency before trading the forex.
  • Pounds per point movement happen in spread betting.
  • The quantity of CFDs gets traded in the base currency unit. For example, if you are trading EUR/GBP, then your stake would remain in the euro. On the other hand, while in the case of USD/GBP, the stake would be with the dollar.
  • In forex trading, one buys in lots through the base currency.

3. Decide when to buy or sell

The decision is a confide one and remains completely in the hands of a forex trader. Once an institution or individual picks the market, knowing about its every movement is the duty of an investor. It can happen by raising a trade ticket on a platform. Every forex currency gets quoted against the other.

Each pair comes with a base and quote currency. The location of the base currency is left, while the quote has a location in the right.

Buying a currency pair is simple. If you can foresee the base currency making an upward movement, one can go to invest in the prospect. On the contrary, one can see whether the quote currency would weaken against the base currency.

Slowly and steadily, as the time elapses profits gets in line and rise with the market.

If the exchange price falls, then with every point, the one will have to fetch losses. Hence, it is better to keep on monitoring the market for making a profitable move.

Whereas, when the market goes into a free-fall mode or plunges, then it is time to short, exit or leave the position for disallowing more damage to funds. You can sell a currency pair if you predict that the value of the base currency would get weaker compared to the quote. If the exchange price falls, then your profits will hike in line with every point.

Notably, in forex, the difference between the sell and the buy price is spread.

4. Getting the best brokers

Brokers are the backbone of any trader. It enables, exposes and pitches them to the best opportunities around the corner concerning the forex market. A broker guides to hundred and thousands of different market located at various places on the planet.

Genuine brokers have a license and registration, plus an authorised monitoring authority regulate their activities. Any brokerage firm that flouts the mentioned principles and rules is potentially vulnerable to frauds. So, traders, precisely beginner forex investors must take care of it.

Currently, Brokereo, IGMFX, HFTrading, ETFinance, 101investing,oinvest and many others are among the top forex brokers. They full-fill all the criteria listed out for an authentic broker.

Check out the minimum deposit rates, leverage, withdrawal and deposit limits, types of accounts and platforms before signing up. Additionally, keeping in mind the demo account feature. Practice your strategies and ideas first hand in the live market lookalike interface that provides the feeling of real-time trading.

5. Attach orders

Attaching or adding orders is like getting the food on the platter during a buffet in some reception. An order is a guidance to trade at a time when in the future rates decided by you reach to the predetermined position. Application of stops and limits at these places lock gains and dish out perils of losses.

Given the unexpected fluctuations and volatility posed by the FX market, learning the usage of risk management tools are handy for people.

There are four types of stop-losses for serving different purposes.

  • A stop-loss order
  • A guaranteed stop loss
  • A limit order
  • A standard stop-loss order

These orders stop the trader from faulting and making further losses when the market turns against the tides.

6. Monitoring of forex trades

Tracking the market is one fundamental way of knowing which way the market would proceed. Also, it helps in predicting about sundry currency types and their growth every day. Besides, a trader monitoring the forex market regularly knows when to buy and sell the assets.

7. Closing trades

Trades get closed primarily for two reasons; when a person starts losing a massive amount of funds in the forex market or the attempted idea of success arrives at the trader.

Is Forex Trading a Legal Activity?

The foreign exchange market is the largest volume market in the financial arena. It is more-far reaching the financial market across the globe, which provides investors with a chance to begin a successful business and harvest money out of it by trading currency pairs. When things grow to this extent many myths and misconceptions surround them. Same is the case with the forex market. They affect almost every trader irrespective of whether he is trading for a long time or is a novice.

Many traders refuse to start trading forex because they think that the foreign exchange market is prohibited across the globe or in their country, as it is something like gambling. But it is not right.

Forex trading is permitted by all countries where the legal entities and individuals are permitted to have currency (currency purchases at the exchange offices such as a bank, currency accounts). Many traders around the globe use forex as an export and import activity for international investment for harvesting money by exchanging price of currency and for numerous serious goals.

So, the straight answer to the question is forex trading legal? It depends on the country you are residing in. There are some countries which allow trading (with no or few restrictions). Some other countries either ban currency trading completely or impose some notable restrictions.

The importance of classifying the country as legal or illegal for forex trading

Forex trading is often legal in those countries which permits you to export or import money. Visiting the banking institution and exchanging your euros for dollars or any currency to utilize it during the vacation is also known as forex transaction. But, the main problem with trading forex is unlike other financial markets it does not have any central exchange which maintains all these transactions. It is a precarious market, and you can lose everything in one go if you are not aware of market mechanisms and market movements.

There are many countries which regulate the forex trades heavily among the individual traders. You need to check and stay informed about every restrictions and regulation that country impose. If you want to harvest most out of this market, you need to check the country’s law about it and build a strong foundation before diving into the market. You may fall into big trouble if you start to trade and realize afterwards that it is illegal in your county.

Where is Forex Trading Banned, Restricted and Allowed?

The idea of trading forex is legal or not will be incomplete without bringing out the list of countries and comparing them based on restricted, allowed or banned. What countries have restrictions on forex trading? Where is forex trading banned? Is forex trading allowed in a particular country? The answer to all these shortlisted questions lies here in the description written below:

Countries where forex trading is banned
Forex market trading is banned in the following countries:

· Malaysia
· North Korea
· Israel
· France
· Bosnia Herzegovina
· Belgium
· Countries following strict Sharia laws including Pakistan
· India

Countries where forex trading is restricted

Here is the list of countries where trading forex is permitted but with certain restrictions imposed by their central government. These restrictions are imposed on the amount of capital which can be transferred by the trader to the financial service provider for trading, how Foreign Exchange Market is accessed for trading and how much amount can be stored in foreign currency (in a domiciliary account). These imposed restrictions can also apply because of anti-money laundering laws.

  • South Africa
  • Nigeria
  • China
  • Ukraine
  • Russia
  • Egypt

Countries where forex trading is allowed

The list given below brings out those countries where forex market trading is banned.

  • Italy
  • United Kingdom
  • United States
  • Australia
  • Cyprus
  • Indonesia
  • Malta
  • Japan
  • Romania
  • Bulgaria
  • Germany
  • Switzerland
  • Canada
  • Most countries in Eastern and Central Europe

Islam and Forex

Many people also live in the misconception that forex trading is banned in those countries which practice Islam. But this myth is not at all true.

The law of Islam, also known as Sharia Islamic Law, prohibits receiving or giving any kind of interest. The main reason for this interdiction lies in the fact that the follower of Islam should only give without the expectation to receive something back or we can say they give only to give and not to get anything back. Thus as per their beliefs, both the forex market trading and swap are prohibited.

A swap refers to a daily withdrawal or charge which is taken out from the deposit of a trader for opening trading positions over the night or transferring positions overnight.

But the Islami accounts and swap-free accounts are created to serve the Sharia Islamic Law. In these accounts, all the commission and fee which are taken as interest are absent. With this, Islamic law is not disrupted and also the forex market becomes accessible to the general public.

Forex Market Regulation

If you reside in those countries which allow forex market trading, it does not mean that you are absolutely free to do anything you wish. For instance, if you reside in the United States, you will have to follow certain rules imposed by the officials on forex trading.

These regulations guard you against any adverse or unfortunate accidents such as if your financial service provider suddenly shuts down and runs away with your hard-earned money.

Or the broker starts to charge the extravagant fee which he did not mention before or you get trapped in scams or sundry financial irregularities.

So, it is important for the self-respecting currency market broker, through which trader’s trade on the forex market, should get a special license number ensuring that they are well-regulated by some authentic authority. So, the operation of any financial mediators which includes both dealing centres and Forex brokers is directed to mandatory

The Best Countries for Forex Trading

The countries that fulfil the criteria listed below are termed as the best countries for forex trading.

1) Countries have good internet networks and provide the best internet service to its citizens.
2) Countries which do not restrict trading in the forex market.
3) Citizens have easy access to the important and big trading hubs along with the capability to open online trading accounts in forex with the regulated financial service providers in these hubs.
4) Countries which have the presence of robust financial technology
5) Countries with unlimited and easy access to any system of payment offered by the currency market financial service provider.
6) Countries which have reliable and advanced technology as a backbone to carry the placement of systems and servers needed to intensify the forex trading experience.

There are very few countries which stick to all these six criteria. If any country fulfils four criteria out of six, then it can also be regarded as one of the best countries for forex trading.

Why do some countries consider forex trading illegal?

There are numerous reasons why countries do not allow forex trading. Still, the four most prevalent reasons for this are a fixed currency system, protection of investors, Islamic law for forex trading and the charges and fee waivers.

1) For the protection of investors: Many countries consider
forex trading illegal because they think it is similar to gambling, where the
probability of making money out of the market is very less. Thus to protect the investor and their money, countries impose restrictions on trading forex.

2) Fixed currency rates:
Countries whose currency rates are fixed often impose questions on Forex trading. In these systems, the central bank is the main entity which varies the value of a currency to keep it stable.

One can expect restrictions on forex trading in these countries because there will be the interference of many officials or people in the monetary policies.

3) Forex trading and Shariah law

The country which follows the Islamic Shariah law, including Pakistan, there are some prohibitions. They keep track of the amount of capital which a trader can provide to the brokerage firm for trading, the total amount of foreign currency which one can store in its local account and how one can access the forex market for trading.

This law prohibits all risky investments, earning interest on the loan and the risk includes on the uncertain investments. It indicates that the Muslim cannot invest in options, forwards, futures and short sells because there is no certainty of returns on investment, and they are highly speculative.

4) Feed and charges waivers

In these countries, the broker has come up with the introduction of some special accounts, which allows swap-free trade in the foreign exchange market. The two main features they offer compared to the regular account are:
· No rollover fees.
· No interest charges or commission

Some financial service providers allow trading through a swap-free account or offer special Islamic accounts for those countries which follow Islamic laws. If you are looking for advanced trading features and brokers providing Islamic accounts, then you can go with HFTrading.

The Bottom Line

Forex is the largest volume market having the potential to generate huge profit. The forex market is complex but worth a try for everybody. Market players can draw interest while claiming the deliver of a currency. But before directly jumping into the market one should build a strong foundation on its basic concepts.