Best FX Online Trading Systems, Platforms, Reviews, Comparisons, Solutions, and More

Interested in FX online trading? We review and rate Forex brokers and provide all the necessary information to get started, including trading strategies.

Forex market (also known as foreign exchange market, currency market or shortly FX) is the largest and most liquid market in the world where currencies are traded with continuous operation, 24 hours a day except weekends. Forex market consists of few financial centers around the world, which function as anchors of trading between a wide range of different types of buyers and sellers around the clock.

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Find out where EUR/USD and other major currency pairs are trending...

Traders on Forex market must, similar to other markets (stocks, bonds...), decide exactly how they will enter and exit individual trades and therefore building their own FX online trading strategy. To be successful in trading Forex, one should learn not only about how to trade currency pairs, but also about the variety of factors that affect exchange rates, mechanics of leveraged/margin trading and capital requirements involved.

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Global Forex Market Size and Liquidity

The foreign exchange market is the largest and most liquid financial market in the world. Traders include large banks, central banks, currency speculators, corporations, governments, and other financial institutions.

The average daily volume in the global foreign exchange and related markets is continuously growing and is counted in trillions of US dollars. The global center for foreign exchange is London with approximately 1/3 of market share, following is New York with 1/6 market share, Tokyo with less than 1/10 market share, Hong Kong and Singapore.

Besides traditional turnover there is a significant volume traded in derivatives. Another interesting thing to point out is that according to some assessments around 80% of the total forex volume is of speculative nature.

FX Online Trading - Banks With Highest Trading Volume

Rank Name Market Share
1 Deutsche Bank 20.96%
2 UBS AG 14.58%
3 Barclays Capital 10.45%
4 Royal Bank of Scotland 8.19%
5 Citi 7.32%
6 JPMorgan 5.43%
7 HSBC 4.09%
8 Goldman Sachs 3.35%
9 Credit Suisse 3.05%
10 BNP Paribas 2.26%
Other 20.32%
Total 100.00%

Source: Euromoney FX survey FX Poll 2009

Forex Market Participants

Unlike a stock market, the foreign exchange market is divided into levels of access. At the top is the inter-bank market, which is made up of the largest commercial banks and securities dealers, which account for more than 50% of all transactions. A large bank may trade billions of dollars daily. Some of this trading is undertaken on behalf of customers, but much is conducted by proprietary desks, trading for the bank's own account.

National central banks also play an important role in the foreign exchange markets. They try to control the money supply, inflation, and/or interest rates and often have official or unofficial target rates for their currencies. They can use their often substantial foreign exchange reserves to stabilize the market.

Other market participants are smaller banks, followed by large multi-national corporations which need to hedge risk and pay employees in different countries, large hedge funds, and even some of the retail FX-metal market makers.

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Forex Trading Characteristics

There is very little cross-border regulation due to the over-the-counter (OTC) nature of currency markets; there are number of interconnected marketplaces, where different currencies instruments are traded. This implies that there is not a single exchange rate but rather a number of different rates, depending on what bank or market maker is trading, and where it is. In practice the rates are often very close, otherwise they could be exploited by arbitrageurs instantaneously.

On the spot market the most heavily traded FX pairs are EURUSD, USDJPY and GBPUSD. The US currency is involved in more then 40% of transactions, followed by the euro, yen and sterling.

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FX Online Trading - Most Traded Currencies

Rank Currency Symbol Daily share
1 United States dollar USD 43.15%
2 Euro EUR 18.50%
3 Japanese yen JPY 8.50%
4 Pound sterling GBP 7.50%
5 Swiss franc CHF 3.40%
6 Australian dollar AUD 3.35%
7 Canadian dollar CAD 2.10%
8 Swedish krona SEK 1.40%
9 Hong Kong dollar HKD 0,014
10 Norwegian krone NOK 1.10%
Other 9.60%
Total 100.00%

Source: Triennial Central Bank Survey (December 2007), Bank for International Settlements

Value Of Currency

The main factors that influence the value for any given currency are usually caused by economic policy, disseminated by government agencies and central banks, economic conditions revealed through economic reports, and other economic indicators; few of most important factors are changes in gross domestic product (GDP) growth, inflation, interest rates, budget and trade deficits or surpluses, large cross-border merger and acquisition (M&A) deals and other macroeconomic conditions. Even more important role then current monetary flows have expectations of changes in monetary flows.

Besides economic factors international political conditions and events can have a profound effect on currency markets. And don't forget about market psychology and trader perceptions, which influence the foreign exchange market in a variety of ways. Be aware of all this factors when building your FX online trading strategy.

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Types Of Forex Accounts

When opening Forex trading account there are several possibilities available and selecting the most appropriate type can be crucial for your Forex secret trading success.

Mini/Micro Forex Accounts

Mini/Micro Forex accounts have several advantages, especially for beginners in Forex trading. You can usually open this type of account for as low as few hundred bucks. With this type of account you will be able to test your trading strategy, if it really works in real-environment without risking high amounts of real money.

Standard Forex Accounts

Standard Forex accounts can be usually opened for few thousand dollars; the idea of trading currencies stays the same, only you do it with larger amounts of money, therefore profits and losses can be greater.

Managed Forex Accounts

Managed Forex account is type of account where you do not pick trades by yourself, but your account manager will say what currency is purchased or sold. This service could be useful if you lack sufficient knowledge about Forex trading and risk management.

Algorithmic Trading

In the last decade or so a very popular type of Forex trading is algorithmic trading, also known as electronic trading, black-box trading or robots trading; approximately 1/4 of all trades by volume are executed using algorithm and it is growing. The idea behind it is to develop and program such algorithm, which will be bring trading decisions based on historical data, following different technical analysis rules and strategies.

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Forex Trading Risks

No matter how successful you think your FX online trading algorithm is, it is impossible to foresee with a 100%-guarantee how exchange rates will move, making the Forex market quite unsteady.

Trading foreign exchange on margin carries even a higher level of risk, and may not be suitable for all investors. Margin accounts bring you the gearing or leverage, so that you can hold a Forex position many times bigger than the value of your account. If the price moves in an unprofitable direction, high leverage can bring you large losses compared to your first deposit.

Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose.

Where To Go Next?

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