Compare forex trading platforms

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Name	Product	Min. deposit	Spreads	Currency pairs
Promoted ETX Capital		£100	Variable spreads	60+	Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73.18% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.	More Info	Compare	loading Fetching your data...
Plus500 CFD		£100	Fixed spreads	70+	CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.	Go to site More Info	Compare	loading Fetching your data...
eToro CFD		$200	Variable spreads	52	CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.	Go to site	Compare	loading Fetching your data...
Trading212 Finder Award		£10	Variable spreads, fixed spreads	150+	Join and receive a free share worth up to £100. (T&Cs apply).	More Info	Compare	loading Fetching your data...

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What is forex trading?

Forex is short for foreign exchange. It uses exchange rates to calculate the value of one currency against another.

Many people deal with foreign exchange (and the fees for converting currency) only when they’re getting their holiday money or buying items abroad. But one popular use of foreign exchange is trading the currency pairs themselves to (hopefully) make a profit. You need a forex trading platform to do this, which is why we created this comparison.

Forex trading pairs two currencies together, with the trader predicting which will be worth more after a given period. The two currencies are referred to as the base currency and the counter currency.

After you’ve set up an account you’ll be able to browse for currency pairs. You can usually choose to buy currency pairs based on quantity or value.

Speculating forex pairs

Some investors choose to speculate on forex pairs in order to make a profit. This is because there’s constant volatility due to a range of different factors that influence foreign exchange rates.

If an investor thinks that a currency is going to strengthen against another, they may decide to trade a currency pair, going long on the one that they think will strengthen.

For example, say the USD/GBP exchange rate was 0.72, which means for every 72p, you can buy a dollar. If you thought that the pound was going to strengthen, you may go short on the US dollar and long on the GB pound. If the rate then moved to 0.5, it would only take 50p to buy a dollar, and you’d have made a profit.

What impacts foreign exchange rates?

Foreign exchange rates change all the time based on a huge range of external factors that impact supply and demand. You hear about the pound strengthening against the dollar or the euro weakening against the pound – this usually has something influencing it, such as:

• Interest rates. Such as the Bank of England rate
• Trade flows. Importing and exporting of goods in or out of a country.
• Tourism. How many tourists are visiting the country?
• Economic strength. How strong the economy is for each of the countries in the currency pair.
• Geopolitical risk. Such as when policy areas clash or collide.

There are two different types of forex trade, these are:

• Spot trades
• Forwards and future trades

Spot trades

A spot trade is one done on the spot. It’s almost certainly the one that you get when you buy foreign currency to go on holiday. For spot trades, you get the current exchange rate.

Forwards and future trades

These are technically different things, but, on the face of it, they’re both agreements to buy on a future date at a predetermined price. Neither forwards or futures contracts trade actual currencies, merely contracts that represent claims to the currency. They show the currency type, the price and the settlement date.

In the case of forwards contracts, they are bought and sold between two parties who decide the terms between them.

Meanwhile, futures contracts are bought and sold with a standard size and settlement date.

Forex trading fees

It goes without saying that forex platforms need to make money. They don’t tend to charge commissions, but it’s not unheard of. They usually make money through spreads, which is a set difference between the buying and selling price that moves in line with the changing prices. There may be additional fees, such as:

• Account fee: This charge might be monthly or annually.
• Inactivity fee: Some platforms will charge you if you stop trading, but this is a decreasing trend as more providers compete for customers.
• Price per trade: This is what it sounds like. The more often you trade, the more likely you’ll get a discount on this.

How do I compare forex trading platforms?

When comparing forex trading platforms, keep in mind the following:

• What leverage and margin do you get access to?
• Does it charge commission?
• What are the spreads like?
• What size deposit do you want?
• What currency pairs do you want access to?

Pros and cons of forex trading

Bottom line

To trade forex pairs, you typically need to have in-depth knowledge of worldwide economics and be able to keep track of what will impact the price of currencies. Because it’s global and primarily over-the-counter, you can trade on the forex market 24 hours a day, which is appealing to investors.

Foreign currency is pretty liquid, meaning they’re not difficult to buy and sell, so trades are typically executed instantly.