6 beginner tips to choose the right forex broker in the UK

Beginners cannot become forex traders. This is a misconception that is generated from the lack of knowledge about forex brokers and trading. There are forex broker platforms that are great for transferring funds and some focus mainly on trading. In this guide, we will discuss some of the trading terminologies involved in forex. Plus, 7 beginner tips that will jump-start your forex journey.

1. Forex: Learning the meaning!

When starting to learn about something, for example: learning how to spell or learning a new skill, you need to know the basics. For spelling, you will need to learn the alphabet.

If you do not know the 26 letters in the English language, how are you going to learn how to spell? Without knowing what and how each letter is pronounced, if you are told to spell, you are going to fall flat on your face.  The same is for learning about forex. You need to learn what do is meant by forex or forex exchange?

In forex trading you trade one currency for another. A typical trade in the forex market includes two currency pairs. Take for example you are trading 1 pound sterling against the US dollar. One person is buying the pound against the US dollar.

The buying and selling of currencies are what is constantly going on in the forex market. The forex market is extremely volatile and it fluctuates every second.

Every 24 hours more than trillions of dollars change hands. If you try to imagine a central location for the forex market, you will fail.

Because the forex market is a network of different banks, institutions, and forex brokers combined. All of them operate in a single market place which is accessible to everyone who can access the internet.

2. What is the meaning of currency pairs? How do you trade them?  

The idea of currency pairs is simple. A typical currency pair in the forex market is GBP/USD.  A currency pair has two currencies that you sell and buy against each other.

There are two terms associated with the currencies involved in a currency pair. Take for example GBP/USD, in this currency pair GBP is the base currency and USD is the quote currency.

So, in the forex market when you click on the GBP/USD currency pair, you are buying the British sterling pound and selling the US dollar.

A currency pair compares the value of the base and quote currency. You can think of it as a way of showing the amount of quote currency needed to buy the base currency. 

3. Learning what is Pips and Spreads!

Pips and spreads are some of the most common terms you will come across when trading forex.

To reference gains and losses, traders use pips. The difference between the exchange rate of two currency pairs is called a pip. The acronym for Percentage In Point is PIP.

In the forex market, currency pairs are quoted to 4 decimal points. The minimum change a currency pair can make is 1 pip. The value of a pip is calculated by 1/10,000.

For example, You want to buy the GBP/USD currency pair. You will be purchasing the British sterling pound and selling the US dollar at the same time. Another trader who is looking to buy US dollars will be selling the GBP/USD currency pair.

The Japanese Yen (JPY) is a bit different. It is quoted in two decimal places. So, for currency pairs involving Japanese Yen, you will need to divide it by 1/100.

In simple words, spread is the profit taken by the forex broker. You see forex brokers do not charge you any monthly fee or any transaction charges. Instead, they offer you a bid and offer price. Traders when buying a currency pair, buy at the offer price. And when selling, traders sell at the bid price. The difference between the offer and bid price is called the spread.

Bid (GBP/USD)Offer (GBP/USD)

In the above table, you can see the difference between the bid price and the offer price. The difference between the two prices is called the spread. The lower the spread the better it is for forex traders in that platform.

4. Choosing the right forex broker platform:

To start trading in the forex market you will need to sign up for a forex broker platform. A forex broker platform is where you buy and sell currency pairs. There are a few things you need to consider to choose the right forex broker platform:

Fees: Yes, in most cases forex brokers do not charge you any monthly or annual fees. But the amount you pay a spread is their fee. Some brokers have a higher spread while others have a lower spread.

There is no fixed spread for forex brokers. This is why the difference in spread varies between different broker platforms.

Forex brokers also charge fees for accounts that are inactive for too long. So, when signing up for a forex broker platform look through the terms and conditions for hidden fees.

Affordability: To open a forex broker account you need to make a deposit. It could be $10 or $1000, it depends on the forex broker platform you are in.

Accessibility:  One of the best things about online forex broker platforms is they are online. They can be accessed from anywhere in the world. If you are looking to transfer money, you do not need to go through the traditional way. You can be sitting in the comfort of your home sipping at your coffee while transferring funds overseas using forex.

Forex Regulations: Forex platforms are online and they do not deal with clients from a specific place. So, they are very hard to regulate. Forex platforms that are regularly regulated by a specific body, are more reliable. Because if they take your money and disappear, who are you going to blame? The regulatory body provides the assurance that the platform is legitimate and safe for transfer or exchanging funds.

Record: If you are transferring money through a forex platform. You need to know if they are reliable or not. What is the way of knowing they are reliable or not? Simple! Check their reviews. A simple google search about them will tell you a lot.

This guide is to help nullify the misconceptions about the world of forex. We at Skyline FX focus on money transfer through forex. You can learn more about us at https://skyline-fx.com.

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