The fast-paced forex markets beckon with high liquidity, popular currencies and abundant opportunities, but investors should pay attention to these three key factors that can influence their trading results.
Foreign currency exchange, or forex, is the largest financial market in the world, far outstripping the stock market. In October 2022, daily global forex trading volumes reached US$7.5 trillion a day, as reported by the Bank of International Settlements.
This is the main reason why forex trading remains highly popular. As the most active market available, forex offers high liquidity and constant price action, translating to plenty of opportunities for traders.
Currencies are constantly rising or falling in value against each other. Hence, by making the right call on a pair of currencies, a forex trader stands to make a gain when the price movement bears out as expected. This is how forex trading works in a nutshell.
On top of the ability to predict how one currency will move against another, forex traders are also impacted by three key factors: access to popular forex pairs, tight spreads and charting tools and platform.
Table of contents
Key factors for success when trading forex
1. Access to popular currency pairs
Theoretically, forex trading can involve any currency pair you can think of. In practice, forex traders only focus on a few popular currency pairs.
This is because the global forex system is dominated by a few currencies, such as the US Dollar, which is the most widely held currency by central banks and the dominant currency used in global trade.
Other leading currencies include the Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Canadian Dollar (CAD), New Zealand Dollar (NZD), Australian Dollar (AUD) and Swiss Franc (CHF).
As such, forex pairs made up of these currencies — such as EUR/USD and USD/JPY — are popular among traders because they offer high liquidity, which is important to reduce volatility and ensure fast order executions.
Another reason for the popularity of certain forex pairs is their suitability in widely practiced forex strategies. For example, consider the carry trade, a forex strategy that involves funding the purchase of a high-yielding currency with a low-yielding currency to generate profits.
As the Australian Dollar was one of the highest-yielding currencies in 2023, and the Japanese Yen among the lowest, the AUD/JPY was widely used for carry trades during the period.
Therefore, one key success factor in forex trading is access to popular forex pairs that enjoy high demand and liquidity, as well as pairs that are suited to the forex strategies you want to pursue.
This means you’ll need to choose your online brokerage carefully, ensuring they provide access to the forex pair you are targeting.
2. Tight spreads
Forex trading revolves around trading one currency for another at a preset exchange rate. A forex broker sells a currency at one exchange rate and buys the currency at another exchange rate – the difference between the two exchange rates is known as the forex spread.
Forex spreads are not fixed; rather they can widen or shrink according to the currency being traded, the time of day a trade is initiated, and the condition of the overall economy. Notwithstanding external factors, forex brokerages are the greatest determinant of the spread charged when trading currencies.
Because the spread impacts your trade, forex traders should strive to obtain the tightest spread (i.e., the smallest difference between exchange rates used for buying and selling the currency) they can find. It is not usual for market-leading forex brokerages to offer spreads from 0 pips, especially for popular currency pairs.
3. Charting tools and platforms
Forex trading is fast-paced in nature, and many experienced traders rely on technical analysis to help determine market trends and spot potential entry and exit points.
In technical analysis, forex traders focus on reading the price charts of currency pairs, combining charting tools and technical indicators to analyse price action and determine the future trends of the market.
Therefore, it is essential to choose a forex brokerage that offers a complete suite of charting tools that allow you to perform technical analysis and verify your trading ideas.
Equally important, forex traders require fast and reliable online connections to ensure their orders are executed without delays. This means forex traders should choose a brokerage that delivers high-speed access with uptime as near to 100% as possible.
Improve your forex trading with CMC Markets FX Active
CMC Markets FX Active is designed to help forex traders improve their trading outcomes. It not only addresses the three key success factors covered above, but also provides additional features and benefits to help forex investors take their game to the next level.
FX Active Trader account
Ultra-tight spreads
One of the foremost advantages of the FX Active Trader account is the access to tight spreads and low commissions. You can enjoy spreads as low as 0.0 pips on the following six major currency pairs:
- AUD/USD
- EUR/USD
- GBP/USD
- NZD/USD
- USD/CAD
- USD/JPY
You can trade these currency pairs without worrying about spreads stacking up and eating into your returns.
You’ll get savings when trading other forex pairs too. With FX Active Trader, you’ll get a 25% spread reduction on over 300 other FX pairs compared to the standard CFD account.
Super-low commissions
You can enjoy further savings with CMC Markets FX Active Trader, thanks to its extremely low commissions. Each trade is charged at just 0.0025% per transaction, one of the lowest forex trading commissions available today.
Additionally, the commission is a fixed rate, which means you will continue to enjoy this low commission no matter how many trades you make.
Wide selection of forex pairs
FX Active Trader offers an extensive selection of forex pairs that are available for trade. Forex traders can choose from popular, widely-traded pairs like USD/JPY, EUR/USD, and USD/CAD, or explore the potential of lesser-traded exotic currencies.
All in, traders can access 330 currency pairs on CMC Markets’ Next-gen Platform, while 175 forex pairs are available on the widely popular MetaTrader 4 trading platform.
Choice of trading platforms
Next Generation platform
CMC Markets’s Next Generation is an award-winning trading platform that combines institutional-grade features and security with fast trade execution and top-notch insight and analysis.
This multi-market platform offers up to 12,000 instruments for trade, catering to the needs of advanced forex traders who have an interest in other markets as well.
Whether trading in the forex markets or otherwise, enjoy professional charting with powerful tools and innovative platform navigation to facilitate your trading ambitions. You can also experience better protection with robust risk management functions, including guaranteed stop-loss orders.
CMC Markets’ Next Generation platform is available with no withdrawal fees, so you can more fully enjoy your returns. Curious to check it out yourself? You can do so with a free demo account.
MetaTrader 4
CMC Markets also offers MetaTrader 4 (MT4), the world’s most popular trading platform.
All you need to do is to download MT4 to your preferred device and sign up for a CFD account with CMC Markets to begin your forex trading journey.
You can enjoy tight spreads and transparent order execution of as little as 61 ms on over 200 financial instruments, including over 175 forex pairs, indices and commodities.
Furthermore, MT4 comes with features built for short-term, high-volume trades, such as no restrictions on scalping, and no minimum stop-loss or take-profit restrictions. Clients can also enjoy premium technical indicators and Expert Advisors at no additional cost.
Elevate your forex game with CMC Markets today
CMC Markets FX Active Trader provides essential features and tools for those who trade actively in the forex markets, supporting them in improving their outcomes with low fees, tight spreads and professional capabilities.
Similarly, investors looking to explore potential opportunities in the forex markets can also enjoy the same robust suite of advantages and benefits, coupled with the flexibility to trade other instruments and markets given the extensive selection of different instruments offered.
Whether you’re a beginner or advanced forex trader, CMC Markets’ FX Active Trader account can help you elevate your forex trading to the next level.
Don’t miss this exclusive sign-up offer, available only through SingSaver:
- Sign up for an FX Active Trader account and deposit S$500
- Make 5 eligible trades till 31 July 2024 (one eligible trade is one open and one close trade)
- Be rewarded with a total of S$100 - S$80 cash bonus, which will be credited into your CMC Markets account and S$20 via PayNow from SingSaver
SingSaver Exclusive Offer: Open a CMC Markets account and get S$20 cash via PayNow. Fund S$500 and make 5 trades within 30 days to get an S$80 cash rebate from CMC Markets. Valid till 30 September 2024. T&Cs apply.
This article was written in partnership with CMC Markets
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