If you plan to start global currency exchange trading, you’ll need to find the best global forex trading platform for you; here's how.
Every day, trillions of dollars are traded on the global foreign exchange or ‘forex’ markets.
Gone are the days when just big business and international banks can profit from changes in exchange rates. These days, international forex trading is open to everyone.
Forex currency trading explained
When you trade forex you essentially predict whether the value of a currency will rise or fall.
However, you always have to select a ‘currency pair’ as you have to predict whether the currency will increase or decrease in value against another currency, not in isolated terms.
For example, international forex trading may involve you predicting that the value of the US dollar (USD) will rise in relation to the Euro (EUR).
You ‘buy’ the value of the dollar and, if its value does rise in relation to the euro during your trade period, then you will make a profit when you close (or ‘sell’) the trade. However, if it falls you'll incur a loss.
One of the advantages of global forex currency trading using a broker is that you can trade ‘on margin’. This means that your exposure to the currency markets is significantly larger than the amount of capital you have to commit upfront.
Using the example above, if you wanted to trade £100,000 on the USD/EUR currency pair you would be required to have just £2,000 of capital at 2% margin.
Although you will be liable for the full amount in the event of a loss, and potentially more depending on how far the market went against you.
What you should look for in the best forex brokers
When considering global forex trading UK investors are advised to compare the deals offered in order to find the most appropriate account.
Firstly, if you’re planning to start global currency exchange trading you will need to find an account that offers access to a range of global currencies. As well as the common currencies such as the US dollar, Japanese yen and euro you may want a broker that can offer you trading in the Australian dollar, Canadian dollar, Swiss franc or even more exotic currencies.
When looking for the best global forex trading platform you should also establish how you will be able to manage your account.
The best forex brokers let you manage your account in real time on the internet as well as offering a service on your mobile phone. Being able to open and close trades on your iPhone or Blackberry can be invaluable if you need to trade on the move.
Finally, you should compare the ‘spreads’ offered by the leading brokers. The ‘spread’ is the difference between the ‘buy’ and the ‘sell’ price of the currency pair. Generally speaking you will find that narrower spreads offer better value as essentially it means that the broker is taking less commission.
Compare your options and apply for the forex trading platform that gives you access to the currencies you need for the lowest cost.