Forex Trading UK Guide for Beginners

You can use this article as a practical and basic guide for beginners to understanding what is forex market, how to trade forex in the UK, and how to open a forex trading account in 3 steps.

Top forex trading brokers regulated in Australia

GO TO TABLE COMPARISON FOR AUSTRALIA

Forex Trading Market in the United Kingdom

London and the United Kingdom have been a financial centre of Europe for many centuries, so it shouldn’t come as a surprise to anyone that the United Kingdom offers great opportunities when it comes to Forex dealing. London is actually the largest currency trading centre today, with nearly 37% of all trading, and an astonishing $1,5 trillion going through forex securities of London, compared to the 6% of Tokyo, and 18% of New-York. When it comes to forex trading, the United Kingdom offers plenty of experienced dealers with a great reputation, making the country one of the most well-equipped places in the whole world for foreign currency trading.

Is forex trading legal in the UK?

FX trading is fully legal in the United Kingdom. Foreign currency trading in the UK is regulated by FCA, the Financial Conduct Authority. They were given their statutory powers by the Financial Services and Markets Act, that was passed by the United Kingdom Parliament in 2000. This organization is an independent body, that not only regulates but supervises the whole financial services industry in the United Kingdom. No country is free of scandals and fraud, but when it comes to security, the United Kingdom probably offers the best solutions for safe foreign currency trading to anyone. FCA requires the client, for example, to separate their assets from the assets of the company, making the clients’ account almost 100% immune to some claims that creditors could make in the unfortunate event of fraud, or bankruptcy.

What is the Forex Market

The Foreign exchange market – or as they often call it, the Forex market – is where currencies are being traded. Not only it is the largest financial market, where hundreds of billions of dollars are getting exchanged every single day, but it is also actually a market that is still growing, and because of its fluidity and sheer size, it is considered to be the most efficient financial market in the world.

How does it actually work?

The most important thing about forex trading is to understand the simple notion that lies behind the numbers. Every single exchange will involve buying a currency and selling another at the same time. The value of one currency is a non-existent phenomenon since its value will always be determined by comparing it to another currency. The currency quoted first, will be the ’base currency’, and the currency they will use as a second reference, will be the ’counter currency’. Together, they are a ’currency pair’. Traders learn to think about currency pairs as a single unit they can either buy or sell. The most often traded currency pairs are EUR/USD, USD/JPY, GBP/USD, and USD/CHF.

How to trade Forex in the UK?

When someone decides they want to get in on the action, the first and most important thing is to understand the basic terminology. We’ve already discussed what is the base, and the counter currency is, but there are some other important elements.

• The exchange rate will tell how much somebody has to spend in counter currency to get the base currency.
• The long position means somebody wants to buy the base currency, and sell the counter currency
• The short position means that somebody wants to buy counter currency, and sell the base currency
• The bid price is the price the broker is willing to buy base currency at, in exchange for the counter currency. It is the best price somebody’s willing to sell their counter currency
• The ask price is the price the broker will sell the base currency at, in exchange for the counter currency. The ask price will be one’s best price at which they are willing to buy from the market.
• The spread  is the difference that will be between the bid and the ask price

The next important step is to learn how to read the forex quote. The bid price will always be on the left, quoted first, and the ask price will always be on the right, as the second reference.

We have chosen the best UK forex brokers on the internet after researching more than 50 online forex brokers in the UK and comparing their features.

Deciding what currency to buy, and sell

This is the trickiest part. Unless somebody wants to rely on pure luck, this is where anybody who wants to make some money, will need to have insight. They don’t necessarily need a degree, but they will need to have some dedication and resourcefulness, so they’ll be able to make some predictions, and educated guesses about the possible change in the economy. Knowing a thing or two about politics also won’t hurt.