International Forex Brokers
What Is Forex Trading?
Forex trading is the largest and most liquid investment market in the world. You can make trades 24 hours a day, five days a week. A forex trade is essentially a bet on the changes in currency exchange rates. When making forex trades, you buy and sell currencies, usually in large amounts. The typical size is 100,000 units of a currency, but some brokers offer lots as small as 100 units.
Because forex trades are based on the changes in a currency pair’s exchange rate. This change is referred to as pips. The change in pip, magnified by the lot size, represents where the money in forex trading is made. For example, if you buy Euros when they are worth 1.2840 U.S. Dollars and sell them when they trade at 1.2842, that change of 2 pips represents your profit on the position.
Leverage is another important aspect of forex trading. The amount of margin a broker offers you is what allows you to buy large lot sizes without putting up a substantial amount of money. The main difference between international forex brokers and those that offer accounts to clients in the US is the amount of margin they offer. US brokers can offer a maximum leverage of 50:1 which means you can have positions 50 times greater than the amount in your margin account. International brokers offer leverage as high as 1000:1. Markets.com, Dukascopy and eToro are three of the most prominent international forex brokers.
Take our example above, with a standard lot size of 100,000 units, your potential profit is $2,000. With a 50:1 leverage, you could earn a much larger profit. Of course, this also holds true for potential losses.
International Forex Brokers: What to Look For
Platform & Tools
International forex brokers provide you with a trading platform and tools to analyze the performance of currency pairs. A good platform lets you set alerts so you can receive email or text notifications when a pair you’re tracking reaches a certain threshold.
Charting tools are another important feature of an international forex broker’s trading platform. A robust set of charting tools includes a wide array of technical indicators that can help you analyze currency pairs to better understand the market and plan your forex trading strategies.
Every broker is going to offer the major currency pairs, which are combinations of the Euro, the U.S. Dollar, the Canadian Dollar, the Australian Dollar, the Swiss Franc, the Great Britain Pound and the Japanese Yen. These are the most commonly traded pairs. If you are interested in riskier investments, exotic pairs are highly volatile but can have the potential for high returns.
Some international forex brokers charge a commission on the trades you make. This commission can vary depending on the size of account you open and the lot sizes you buy. The most common cost associated with forex trading comes from the spreads. The spread is the difference between the buying and selling, usually called the bid/ask price. This is a markup applied by the brokers. Typically, a broker with a commission has lower spreads.
It’s important to know that because exchange rates are constantly in flux, so too are the bid/ask spreads. Spreads are also subject to changes in a country’s economic circumstances. Exotic pairs usually have higher spreads than the major pairs.
Education & Support
International forex brokers should provide resources to teach you about the marketplace. These usually include webinars, blogs, training courses and articles. Because this market is constantly changing, the best forex brokers updated these resources constantly.
Because the forex market is trading 24 hours a day, five days a week, you want a broker that has customer service hours that match the trading hours. Live chat is another option that many brokers also offer.
Forex trading is the largest investment market in the world – one that trades around the clock and has the potential for high returns. International forex brokers offer higher leverage than their U.S. counterparts because of tighter regulations on U.S. traders.