How to Trade Forex in Canada in 2023

A practical short answer to the question how to trade forex is to open an account with a forex broker, fund your account by depositing money into your account and then place your trade orders after analyzing the forex market on trading terminals like MT4 and MT5 and the like. All this can be done online.

For a beginning trader who wonders what is forex trading and how does it work the answer is it is the trading of one currency for another by: a) buying the currency that you think is going to strengthen (and rise in price) and selling simultaneously the currency you think is going to weaken (and fall in price) or b) selling the currency that you think is going to weaken and fall in price and simultaneously buying the currency you think is going to strengthen and rise in price.

As to how much money you can make trading forex the answer is: a real fortune can be made trading forex - the amount of profit that can be made depends on the capital (known as the margin) that a trader is willing to bet in the trade order, and the leverage that your broker will agree to provide for you trade (essentially allowing you to borrow capital and supplement your capital for the trade order). Of course, the successful trader must forecast the price movement correctly.

A well-known example of how much you can make trading forex is the billion-dollar gain famous financial mogul George Soros made in 1992. He did it by betting a huge amount of money against the pound sterling in 1992 - by selling the pound sterling and simultaneously buying the dollar. His bet meant that he expected the price of the pound sterling in terms of the US dollar to fall. He was actually successful and bought the pound sterling back for a lot less money than he sold it for, earning $1 billion in the process.

Analyze the Market Daily

Successful forex trading then involves correctly forecasting price movements. Therefore a trader must analyze the market daily by studying price charts on trading terminals. The study of price charts is known as technical analysis.

There are many guidebooks on technical analysis written by several successful forex traders. They describe how prices can be forecast by identifying definite price behaviors on price charts. These definite price behaviors on price charts are known as chart patterns.

Technical analysis guidebooks teach how to identify various chart patterns for making price forecasts by using different analysis tools known as indicators. Indicators are usually quantitative descriptors displayed on price charts that are generated from past price behavior, and they are used to estimate where will the price move next.

One can take advantage of many well-known technical analysis guidebooks and practice their market forecast skills by analyzing various market charts. Practically all brokers allow beginning traders to open so-called demo accounts (traders don’t have to deposit any money for opening demo accounts) where they can practice their trading skills.

Traders can log on to their demo accounts and use the trading platforms (equipped with the most popular indicators) for analyzing the price charts and placing demo trading orders (traders are allowed to set the balance of their demo trading accounts themselves with virtual funds). Traders can then see how successful they are in predicting price movements and how successful their trading strategies are.

Follow the Fundamental News

The multitude of economic developments shapes forex market behavior. A successful trader then must follow economic and policy news known as fundamental news to anticipate correctly forex market behavior.

Markets actually reflect anticipated economic developments and news. It is said that markets discount anticipated news, and when actual news comes in different from what was widely expected - market corrections take place. Then traders with bets placed in anticipation of such surprise news will reap gains in form of substantial profits.

Stick to a Trading Plan

Once you feel confident in your market analysis skills you are ready to start trading. Depending on trading strategy preferences, traders usually fall into roughly three groups based on trade time horizons.

Single-session traders look to gain from small price movements over short time periods (minutes or hours) within the trading day.

Swing traders target trades that can be completed in a few days to a few weeks.

Position traders seek larger gains and can wait longer than a few weeks to achieve them.

As many studies of trader performance at most forex brokers indicate, majority of beginning traders end up losing their capital in a relatively short string of inconsistent trades. A common issue that comes up from these studies is that these beginning traders usually need to have clearly defined trading plans.

Most successful traders advise preparing a trading plan before actually placing an order, and then sticking to it as the market moves. Preparing a trading plan essentially means deciding what trading strategy will be used - including when a trade will be entered and when it will be exited, the size of the trade.

Once this strategy is determined based on your time horizon and risk preferences, it will help you to build and reshape your trading positions as markets are on the move.

For example, a strategy of entering a trade when the price is about to resume advancing after a pullback can be employed. This defines your entry strategy. Then you will be looking for specific entry signals as the price pulls back. For instance, entering an area of support—a price level at which demand might be strong enough to prevent further declines, can be an entry signal. So approaching an old low particularly can be such an entry signal for placing your trade.

Similarly, you must plan when to exit the trade – both when the market actually moves in the direction of your trade and when it moves against your trade.

In case the trade goes in your favor you must decide what is the target price/return you want to achieve before closing your trade. You may decide to sell part of your position at your initial target price and let the rest of your position run.

And when the market moves against you, you can set a stop order at a price below the support level to help limit your loss if the stock breaks below that level.

An important part of a trading plan is determining how much money you are willing to risk in each trade. A popular method is the 2% Rule, which means you never put more than 2% of your account equity at risk. For example, if you are trading a $10,000 account and you choose a risk management stop loss of 2%, you could risk losing up to $200 on any given trade.

It takes discipline to stick to a trading plan. Many beginning forex traders who actually develop trading plans end up giving up on them. Depending on your personality, you may or may not have difficulty maintaining control and discipline as you endure a string of losses.

Find a Trustworthy Broker

Forex brokers are the main financial market intermediaries who facilitate forex trading. Traders have to choose a broker who can provide them with the quality services they need at acceptable prices, and open an account with the broker.

Brokers provide real-time access to price quotes for assets in financial markets through trade terminals that are equipped with technical analysis tools such as indicators as well as charting tools. Once you deposit money into your account you can place trading orders and start earning return on your investments!

When choosing a broker it is important to make sure the broker is trustworthy. A proven past record of the broker that can be studied, and a registration of the broker with a financial oversight authority are important factors to consider in the selection process.

It is informative to see what past customers are saying about their experience with the broker. The registration of the broker with a financial oversight authority provides an assurance that the broker operates within established rules and a degree of protection in the form of the oversight of that authority which ensures broker’s compliance to established rules.

Fees and charges brokers levy for their services as well as the speed of order execution are additional factors worth considering when choosing a broker.

Spreads, swaps and commissions are all costs to be considered when comparing different brokers. Floating or variable spreads are usually lower under low market volatility conditions than fixed spreads brokers charge, but they get jacked up as volatility rises and one must be aware of their effect on trading.

A quick online search for “BEST FOREX BROKERS IN CANADA” brings up a list of brokers with IFC Markets, Interactive Brokers and Avatrade among them.

IFC Markets

IFC Markets has been among best brokers in Canada for best competitive spreads. The company has 16 years of experience in the forex and CFD markets offering low fixed spreads for hundreds of instruments. IFC Markets offers also best swaps for position rollover – at interbank rates. Traders can also use the IFC Markets’ proprietary platform to create their own trading method known as the “GeWorko Portfolio Quoting Method” , as well as open Islamic accounts. Beginning traders can open demo accounts for practice trading, and can make use of the IFC support team via live chat, Skype, Facebook Messenger, Telegram, WhatsApp, Instagram, Discord, Signal, and more. They can even request a call back or call the staff direct in Canada or the UK.

Interactive Brokers

Interactive Brokers offers professional trading tools like the FXTrader with an optimized trading interface. The company notes its commissions are low with no hidden spreads or markups.

Forex.com

Forex.com touts attractive spreads and decades of experience. The broker mentions availability of in-house analysts and selection algorithm for trading opportunities.