If you wish to make money in the Forex market, then using the best Forex trading platform ensures that you don’t spend most of your profit paying commissions and fees.
Forex market is a $6.6 trillion daily turnaround market, the most liquid amongst traditional financial markets, a trader’s paradise where chances of making huge money are assured as long as you play your cards well.
There are many Forex trading platforms online; choosing the right one ensures that when all the surcharges are levied on your trade, you still have a substantial amount of money left with you.
Before we begin, we must understand what Forex brokers are and what part they play while you trade in the Forex market.
Understanding Forex brokers
Forex brokers are retail financial institutions acting as intermediaries between the Forex market and individual traders. These Forex brokers have official websites and target small traders who want to use margins to trade in the Forex market.
Forex brokers offer currency trading platforms. Generally, most Forex brokers offer and support 3rd party Forex trading platforms like MetaTrader 4 and Meta Trader 5 (MT4/MT5) from MetaQuotes. In addition, however, some may have in-house proprietary trading platforms.
Some Forex brokers also offer study material where they share their Forex market knowledge. This is useful as aspiring traders can learn about the jargon and the techniques used to make a successful trade. Apart from this, few brokers also allow access to the experts’ trade analysis and financial news feed enabling the traders to make better decisions while trading.
Some brokers also give you the option of using bots for a fee. These trading bots run on various algorithms that are based on historical data. They also predict the next price movement. You only need to punch specific inputs as per your trading style, and the bot does the rest. Although the bots are automated, they do need a bit of monitoring.
Nonetheless, it would help if you approached a reputed and reliable broker who offers these trading bots. These firms or brokers have invested a lot in researching these bots and have proven quite successful while trading in the Forex market. In addition, some reputed and reliable Forex brokers or firms state that these bots give better results than a seasoned Forex trade.
As you search for the best Forex trading platform, you must consider which one to choose: an in-house or a MetaTrader trading platform. The choice of selecting a bot is also up to you. Remember that a reliable and reputable trading platform has more to offer. Avoid going for a bot being sold at a cheaper rate; the chances of it improving your chances at success are next to nil.
Advantages of Forex trading
Forex trading involves currency pairs, where when one currency is bought and simultaneously sold against another. Profit is made on the price difference of the currency in the two exchanges. The pair are generally purchased at a low price and sold at a high price.
Many traders are drawn towards it as it is one of the simplest forms of trading. Anyone can download a Forex trading platform like MetaTrader, register, make a Forex account, and start trading. The advantage is that you can quickly open and close positions and trade the currency pairs at your own pace. In addition, since the trade is simple, there are fewer chances of an aspiring trader getting confused.
Pros and Cons of Forex trading
Like any other traditional financial market, Forex has its set of pros and cons. We have listed down some of these forex trading pros and cons for your understanding:
- High Leverage: Since the trade revolves around the price of the currency pairs, the traders can use leverage. With minimum capital, the trader can open up a position by using leverage. Leverages offer traders the potential to profit significantly with a small margin deposit.
- High liquidity: The currency trading market is the largest and the most liquid financial market in the world offering major currency pairs to trade in. Thus, sizable transactions are executed in those pairs throughout the normal trading hours.
- Around-the-clock trading: From 5 p.m. EST on Sunday until 5 p.m. EST on Friday, regardless of U.S. holidays, the Forex market is open for trading. Thus forex traders can avail the around-the-clock trading facility in the Forex market irrespective of the trader’s varied time zone.
- Fewer asset choices: Although you have various asset choices in the traditional stock market, the Forex market offers limited currency pairs for trading, and most of them are not as liquid as the major ones.
- Volatility: There is price fluctuation in the Forex market whenever there are news information releases. Such fluctuations can either be a boon in the form of gains or losses.
- Unregulated OTC market: Due to over-the-counter (OTC) trading, the interbank forex market is still mainly unregulated. Some controls are implemented in many jurisdictions to safeguard retail traders who deal with online brokers.
How the Forex Market Works
Traders interchange one currency in exchange for another. The profit is made on the price difference between the two exchanges. Like the stock market, where the price of the stocks fluctuates, in the Forex market, the price of currency pairs fluctuates—factors like demand, supply, news regarding the latest development, and overall future expectations.
Forex traders either buy when the currency pair is low or sell when the price is high. So these traders try to make a profit no matter the market condition.
Forex traders will try to study the historical price data, accessing substantial data to work on and outline trading strategies. In addition, future price trends can be predicted by reviewing the past performance of currency pairs. For example, comparing the European Union and the United States’ current events can give insights while trading Eur/USD currency pairs.
While trading in EUR/USD currency pairs, you will notice that the price of the pair moves inverse to the current news you are reading. Therefore, reading information based on current events can enable you to predict the price trend.
Choosing the right Forex broker
As you try to choose the best Forex trading platform, you need to research many Forex brokers, go through their fee and commission structures, picking the one which suits your trading style. You can always open up a demo account to check the features and how smoothly it works. Carry out some dummy trades to study the response of the platform. Try to get familiar with the Forex trading application. Apply all the knowledge you have learned while trading. Go Live once you have all the confidence to start trading.
While considering all the features of the best Forex trading platform, you must look for good client support. They should be available to answer your doubts, from technical to software queries, irrespective of the time zone. The Forex trading platform should also be free from glitches, and the broker server should run in real time.