Making money in Forex! Learn Forex and choose best Forex brokers!

What is Forex?

Forex, known as foreign exchange, is an abbreviation of “Foreign Exchange Margin Trading.” In a word, Forex is currency trading, a transaction that buys and sells currencies such as US Dollar (USD), Euro (EUR), Pound (GBP), Japanese Yen (JPY) etc…trading two currencies which is called “currency pair.”

Forex market is the largest in the world with an average daily trading volume exceeding $5 trillion which has highest liquidity.  For example, comparing with the trading volume of TSE (Tokyo Stock Exchange) in Japan, TSE’s one-year trading volume is equivalent to that of two days of Forex market, all the world’s combined stock markets trading volume is far lower than Forex market trading volume.

Let’s think what does that mean to you?  It’s probably worth considering for you to take a closer look at Forex trading and you may find some exciting trading opportunities unavailable with other investments!

Forex is “currency exchange”

Forex is a transaction to “exchange one currency for another” and if you’ve ever traveled overseas, you’ve experienced a Forex transaction.

For example, the currency used in Japan is the JPY, and the currency used in the United States is the USD. Let’s say you’re an American and you take a trip to Japan and you convert your USD into JPY.  When you do this, the Forex exchange rate between the USD and the JPY is determined based on supply and demand and it also determines how many JPY you get for your USD, and the exchange rate is always fluctuating continuously.

How to trade, how to buy and sell currency

For example, let’s think of EUR/USD which is the most-traded currency pair in Forex market.  You always see two prices in your trading platform one is “Buy price” and another is “Sell price” and the difference between two prices is called “spread.”

In the case of EUR/USD, the EUR is the first currency in the pair and the USD is second one, so if you click “Buy” or “Sell” on your trading platform, you are buying or selling the first currency in the pair, buying or selling the EUR.

You can open up a trade by selling, not only buying

This is one of the important point that makes Forex attractive for investors because you can expect not only price hikes but also price drops as you can open up a trade by selling. Let’say you expect the price of the EUR will be higher against the USD, so you will buy the EUR.

In addition to buying, what makes the Forex trading attractive is that you can open up a trade by selling the first currency which is the EUR if you think that the EUR will drop in value.

You earn profits by rate fluctuations

As mentioned above that the exchange rate is determined by supply and demand, thus if there are many traders who want to buy JPY than USD for some reason, rate of JPY becomes higher, but it will be lower in the contrary case.

But how you can earn your profit?

Currency rate fluctuates from time to time, and you can earn profit thanks to fluctuation:

  • 1 USD was 100 yen last week
  • 1 USD is 110 yen today

In the above case the rate is fluctuated from 100 yen to 110 yen.

  • You paid 100 yen for buying 1 USD last week
  • You sell 1 USD for 110 yen today

in this way you can make a profit of 10 yen, because you paid 100 yen upon buying USD and receive 110 yen upon selling USD.

Forex is transaction that aims at making profit by utilizing fluctuation and difference in exchange rate, the difference between the buy and sell rate offered by Foreign Exchange market and Forex brokers.

Advantages of Forex

Here are bullet points of merit and advantage of Forex trading:

  • Can utilize high leverage which can increase your buying power (can start with smaller deposits)
  • Negative balance protection will protect traders not lose more than their deposits
  • Can receive bonus
  • Able to trade round-the-clock 24 hrs a day, 5 days a week
  • Being able to use automated trading systems (Forex robots, signals)

Advantage & disadvantage of leverage in Forex

One of the greatest advantage of Forex trading is “Leverage” and currency trading using leverage is called “Margin trading.” Margin trading allows traders with borrowing funds and paying only a small portion of deal.

Leverage increases the capital efficiency of deal and financial capabilities of traders, it allows traders to open up a trade with as smaller capital as possible. However, higher leverage leads to lower the margin, so traders should keep a certain level of capital in the account to guarantee the margin.

Meaning leverage is capable of not only magnifying profits but it also losses, it has both “advantage” and “disadvantage.”

Margin requirements are set to limit traders’ debt potential thus traders will not lose more than deposit in the account, this limitation is called “Stop loss or Stop out level.” If traders fail in trade and suffer losses equaling to the margin, Forex broker has right to execute “Stop loss” to close the positions.

Upon opening trading account, traders can set out leverage ratio and it can be changed subsequently at traders’ discretion, maximum leverage ratio differs from broker to broker.

Stop out level is important for high leverage

Stop out level in Forex is set to limit traders’ maximum losses and its level also differs from broker to broker.  Stop out level is a specific point at which traders’ positions will be closed automatically by Forex brokers if losses equal to the margin. 

Here’s an example how stop loss works:

Let’s say you have open position and current margin is $500, and your account’s stop out level is 50%. In this case, if you suffer losses more than $250 your position will be closed.

But what if your account’s stop out level is 20%? Your account will not be closed until you suffer losses with more than $400, unless your margin balance still has more than $100 ($500 x 20% = $100).

As mentioned above that high leverage leads to lower the margin, thus you’d be better off to select Forex brokers and use trading account setting out lower stop out level as described above.

Forex brokers Leverage ratio
(maximum)
Stop out level
XM
XM_logo
1:888 20%
HotForex
XM_logo
1:1000 10%-20%
TitanFX
TitanFX_logo_wp
1:500 20%
LAND-FX
TitanFX_logo_wp
1:500 30%
AXIORY
AXIORY_logo_wp
1:400 20%

Negative Balance Protection, a great safeguard in Forex

Why is Negative Balance Protection great safeguard?

Most times Forex brokers are setting out safeguard available such as margin calls and stop loss (stop out), but many times in the past these safeguards didn’t work well when sudden and unexpected market change took place…because quick market movement may move the price beyond the margin call and stop out level may result to massive losses.

For example, in Suisse Franc Shock, huge number of traders were suffered with enormous losses and some Forex brokers were forced to shutter their operations.

Negative balance protection ensures that traders will not lose more than deposited capital in trading account, even if the balance of account goes into negative as a result of the trading activities, maximum losses will be limited to their deposited capital.

This means that if you choose a Forex broker that offers negative balance protection, you never owe extra money to pay back, that’s why negative balance protection is a great safeguard in Forex trading.

Forex brokers Negative balance protection
XM
XM_logo
赤丸
HotForex
XM_logo
赤丸
TitanFX
TitanFX_logo_wp
赤丸
LAND-FX
TitanFX_logo_wp
赤丸
AXIORY
AXIORY_logo_wp
赤丸

Benefits of Bonus promotion in Forex trading

There are many Forex brokers offering bonus promotion and most of traders are expecting to enjoy monetary benefit for trading by receiving bonuses.  Traders are mostly happy to get bonuses as credit for trading and brokers are happy to reward with bonuses in exchange to customers’ loyalty.

Forex brokers are offering bonuses because it is not always easy for brokers to get traders to move from one broker to another just by offering super excellent execution and lower spreads, brokers are mostly offering bonuses to:

  • Increase the number of customers
  • Increase the trading volume
  • Get customers more loyal

There are different types of bonuses such as:

  • Welcome bonus
  • Deposit bonus
  • Loyalty program bonus

These bonuses are major types that Forex brokers are offering.

What is “Welcome bonus”

Welcome bonus is called “no deposit bonus,” you can get bonus for free.

No deposit bonus is ideal for the beginners who want to check conditions and trading environment of the specific broker before you deposit real money, thus you can make perfect risk-free start.

Forex brokers Bonus size Withdrawable
XM
XM_logo
$30 Only tradable
HotForex
XM_logo
$50 赤丸

What is “Deposit bonus”

Deposit bonus is a kind of reward that trader can receive as an extra trading capital but unlike welcome bonus trader has to make deposit into trading account.

Open an account, deposit and get bonus is the common practice that trader has to follow for receiving deposit bonus, and there are mostly two types of deposit bonus.

  • Deposit bonus that will be credited into trading account as soon as trader makes deposit
  • Trader has to deposit and carry out a certain number of trades and/or volumes

The first one is that you can get bonus straight away every time you make deposit, but the second one requires you to complete quite a number of trades first.

The size of deposit bonus is dependent on the size of deposit you make, a certain percentage of your deposit will be offered as deposit bonus.  Each Forex broker has different percentage criteria but it is usually raging from 20% – 100%.

Let’s say you open up an account in Forex broker applying 50% deposit bonus not requiring any other conditions, you will receive $250 deposit bonus as soon as you deposit $500.

Forex brokers Min Deposit Bonus size Withdrawable
XM
XM_logo
$5~ 100%-20% Profits are withdrawable
HotForex
XM_logo
$5~ 100% 赤丸
LAND-FX
TitanFX_logo_wp
$300~ 100% & 10% Profits are withdrawable

As you can notice through above information, there are many advantages of Forex Trading and we recommend following Forex Brokers for your best choice.

Best Forex Trading Brokers/Review, Comparison

Here’s list of best Forex brokers, it attempts to look at the least minimum aspects that a trader must check to see the availability and reliability of Forex brokers, should consider to check also reviews on each Forex broker for making your final choice.

XM One of global leader in Forex, $30 No Deposit Bonus, Deposit Bonus up to $5,000

Minimum
Deposit
Maximum
Leverage
Regulating
Authority
Bonus
$5 888:1 CySEC, FSP, ASIC Welcome Bonus
Deposit Bonus
Loyalty Progra,

TitanFX On the rise in Asian countries with sound trading environment

Minimum
Deposit
Maximum
Leverage
Regulating
Authority
Bonus

$200

500:1 FSP(New Zealand) N/A

AXIORY cTrader is also available, more than 10 years of experience and good reputation

Minimum
Deposit
Maximum
Leverage
Regulating
Authority
Bonus
$200 400:1 IFSC(Belize) N/A

HotForex EU licensed broker,  attractive 100% Deposit Bonus up to $8,000 etc.

Minimum
Deposit
Maximum
Leverage
Regulating
Authority
Bonus
$5 1000:1 CySEC, FSCA, FSC Welcome Bonus
Deposit/Credit  Bonus
Loyalty Program

LAND-FX FCA licensed broker, significant presence popular in Asia and Europe

Minimum
Deposit
Maximum
Leverage
Regulating
Authority
Bonus
$300 500:1 FCA, FSP Deposit Bonus
Recovery Bonus

Economic Calendar for Forex Trading

Economic Calendar for current week, you can choose Previous week, Next Week, Current month, Previous month and Next month too, click each event to check details.