In recent years, a large number of foreign exchange brokers have come in to the market.
They allow you to open a UK foreign currency trading account which means you can profit from correctly predicting movements in exchange rates between the British pound and other currencies.
What is forex currency trading?
Foreign exchange is a market where you can trade foreign currency. You will often see it referred to as 'forex' or 'FX'.
When you trade foreign currency you have to select a 'currency pair'. This is because you always buy one currency and sell another.
For example, you might buy the British pound against the US dollar, anticipating the pound will increase in value relative to the dollar. If the pound does rise relative to the dollar, you can close your position and therefore make a profit. However, if the pound weakens against the dollar you'll have made a loss when you close your trade.
The main currencies you will trade in are known by three letter abbreviations such as EUR (euro) and GBP (British pound).
One of the main advantages of online currency trading is that you can use a system called 'leveraging'. This means that you can trade a value of currency far in excess of the capital in your forex account.
For example, if you were to trade £50,000 on the GBP/EUR currency pair you would be required to have just £1,000 at a 2% margin in your account to open your position.
You will of course be liable for the full amount plus losses if things don't go according to plan and it's important to be aware of the risks before you start trading forex.
What to look for when you compare UK forex trading platforms
There are three main factors to take into account when you compare UK forex trading platforms:
What type of forex currency trading they offer
The currencies they offer access to
What their 'spreads' are
How they let you manage your UK foreign currency trading account
There are different types of forex currency trading such as 'contracts for difference' (or CFDs), spread betting or traditional trading. Make sure you open the right account.
In addition, it is useful to compare the 'spreads' offered by the best UK forex brokers. These are the difference between the 'buy' and 'sell' price of the currencies and is effectively the brokers' commission. Generally speaking you will find that brokers who offer narrower spreads offer better value.
You must also look at the range of currencies on offer to ensure that you're able to trade on the forex markets that you're most interested in.
Finally, you should compare UK forex trading platforms. These are the ways that you can manage your forex currency trading account.
The best UK forex brokers have both an online and a mobile service so you can buy and sell in real time on your PC, laptop, Mac, iPhone, iPad or smart phone.
They'll also offer loss limiting tools such as guaranteed stop loss orders and these are important in ensuring you don't lose more than you can afford.
When you're comparing your options look for the forex trading platform that offers the most competitive spreads on the currencies you want to trade on combined with the trading facilities you'll find most valuable.