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Forex trading is quickly becoming one of the most popular forms of trading for UK investors seeking to diversify their portfolio. If you are new to this process, it is best to look for Forex brokers regulated by FCA in the United Kingdom, as they are more highly regulated than offshore traders.
This means that you, the consumer, are more protected. For example, FCA regulated brokers are required to have lower leverage and higher liquidity, plus the FCA provides insurance coverage in the case that a broker goes bust.
How to Start FX Trading in the UK?
If you are interested in forex trading and you want to get started with a UK brokerage, there are a few simple steps you can take. The first step, of course, is to find a brokerage that suits your risk tolerance and budget, so that you can set up an account. When choosing a brokerage you should consider their account minimums, typical spread, fees, and which regulatory bodies they adhere to.
1. Choose a Currency Pair
The currency pair you choose is the foundation of every trade you will make. Most new traders pick one of the major pairs, such as USD/GBP. You should start with currencies that you have a basic knowledge of before moving on to more exotic pairs.
2. Pick a Trade Type
There are a number of trade types, but the most common are CFD trading and spread betting. CFD trading is when you trade a certain number of contracts in base currency units (for example, GBP/EU).
Spread betting is when you trade pairs for every point movement. This is generally the fourth decimal point, but it can vary.
3. Decide on Buying Vs Selling
4. Set Orders
Orders are the automatic trade instructions set at a future time based on triggers, such as exchange rates. Stop loss and limitation orders are placed to lock in profit and minimize losses.
5. Monitor Your Position
6. Close Your Position
When you feel you are ready to finalize your trade, you must close your position in order to liquidate your trade and either withdraw your fund or invest them in a new bet or commodity
These six simple steps are all you need to complete your very first forex trade, and no matter how complex your future trades become, this progression will remain the same.
In UK spread betting, the spread represents the difference between the buy and sell prices, and your profit or loss is determined by the extent to which your prediction is correct.