The major participants in Forex markets are the central and commercial banks, hedge funds, and multi-national corporations. However, the Forex market is the easiest financial market to access as a retail trader, on a desktop computer or a mobile device and with only a small amount of investment capital. Unlike the ‘big players’, who invest millions in Forex trading, retail traders can get started with limited funds and without any previous trading experience. They just need to select a Forex broker, preferably from the regulated CFD brokers and make an initial deposit indicated in the trading account details. In our experience, regulated CFD brokers stipulate an opening balance of around $100 on a regular trading account, but the amount varies according to the account type and the benefits provided to customers. Nevertheless, there are Forex brokers for beginners, offering micro accounts with deposits from $1, giving novice traders the opportunity to ‘test the waters’ before taking the plunge with bigger investments and riskier trading positions.
If retail clients could invest only their own capital into trading Forex, the potential for making a worthwhile profit would be limited to very wealthy investors. However, the best Forex brokers offer marginal trading and leverage to their clients, as part of the online trading package. Leverage lets Forex traders control a larger amount of the market without putting up the full amount of capital. Usually, the amount of leverage accessible on the Forex trading platform, varies from 1:25 up to 1:500. Whilst we have seen regulated CFD brokers offering from 1:1000 up to 1:2000, trading at this ratio level can be very risky and should be avoided by inexperienced traders. Notably, the ratio of leverage offered may depend on the customer’s trading experience and type of trading account. The best Forex brokers often ask customers to prove their Forex trading understanding by taking a simple test on the website. The test results decide the initial leverage ratio, which may be increased as customers gain trading experience. Successful leveraged trades generate larger investment profits for traders than if they had traded using only the funds in their trading account.
Nevertheless, leveraged trading can ‘backfire’ when unsuccessful trades occur, as the potential losses are greatly amplified. Nevertheless, the best Forex brokers typically protect their customers from catastrophic losses by providing limiting features such as ‘Stop Loss’ settings and pre-set margin calls on the platform. In our experience, Forex brokers for beginners and regulated CFD brokers, are especially careful to integrate negative balance protection into their trading platforms.
The Forex market provides infinite trading opportunities to traders especially when markets are very volatile. Because Forex trading involves predicting price movements of currencies against each other, the depreciation of one currency means the appreciation of another. Moreover, global Forex markets are open 24 hours a day from Monday to Friday with the Asian, European and Asian market sessions following each other because of the different time zones. The best Forex brokers provide support during the entire time that markets are open. In our experience, Forex brokers for beginners and more experienced traders provide demo accounts for practice trading as well as educational training courses free on their websites. Importantly, regulated CFD brokers are often ECN brokers (electronic communication network) linking smaller investors with liquidity providers in Forex markets. ECN brokers don’t trade against their clients but are interested in their customers profits as they get commissions on those profits.