How to Invest in Forex in the Philippines

Last Updated – Aug 22, 2023 @ 9:16 am

If you think the stock market holds the record for the largest amount of money being traded daily—think again.

Every day, the Foreign Exchange (FOREX) market, trades an average of $5.1 trillion, easily dwarfing the stock market’s daily trading average of a “mere” $212 billion.

Why is Forex trading popular and how do people make money from it? 

This article aims to answer that and more. We’ll take a look at how Forex trading works and understand key concepts so that anyone interested can get a 30,000-ft view of what it’s all about.

Also, we’ve compiled a list of arguably the best and most popular forex brokers to choose from right now based on multiple reviews and feedback available online.

A quick disclaimer though:

I am aware that Forex trading is currently not allowed in the Philippines, as per this 2018 advisory from the SEC. 

However, learning about how it works and analyzing currency movements is not illegal.

This post from one of the most well-known Forex trainers in the country provides a helpful resource for anyone looking to understand the status of Forex trading in the Philippines right now and where it is headed. 

What is Forex Trading?

Foreign exchange or Forex, at its core, is all about trading one type of money for another. To get a solid foundation of how it works, let’s use a popular scenario wherein exchanging local currency to another is essential: traveling to another country.

Meet Juan.

Juan is bound for Japan in a few days, so he goes to the bank to have some money changed to Japanese Yen. He had exactly Php50,000 for pocket money, which he was able to successfully convert to yen at an exchange rate Php1 = 2.1200 yen.

This means that 1 peso has a value equivalent to 2.1200 yen. At that rate, Juan was able to get 106,000 yen in exchange for his Php50,000.

Php50,000 x 2.12 =  106,000 yen

Upon arriving in Japan, he bumps into a former classmate who has been residing there for years. He insisted that Juan stayed with his family for the entire duration of his trip.

With virtually zero expenses for the entire week he was there, Juan didn’t have to spend a single yen (what a lucky dude). 

With his business trip over, he goes back to the Philippines and goes straight to the bank to have his 106,000 yen changed back to peso.

At the bank, he was told that the exchange rate is now Php1 = 2.0000 yen. Essentially, it means it now costs fewer yen (since it increased in value) to purchase a single peso.

Using this new exchange rate, Juan will get:

106,000 / 2.0000 = Php53,000

Php53,000 – 50,000 (his initial investment) = Php3,000

He was able to net a Php3,000 gain from this transaction. 

And this, my friend, is how you earn (or lose—if it was the other way around) money in Forex trading. 

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Forex Key Terms

As simple as its core concept might seem, however, there are still quite a few things to learn about as you go deeper into the world of Forex trading.

Here are a few definitions to get you started: 

• Pip – a.k.a “Percentage in Point”, used to measure the movement of the exchange rate. It is the unit used to determine if you profited or have lost money on an exchange. A single unit of pip is equivalent to 0.0001. “I made 20 pips on my trade yesterday”, or “the EUR/USD gained 10 pips in the last 8 hours” are some examples of how the term is used in context. A pip has an equivalent currency value which determines your actual gain or loss in monetary terms.

• Currency Pair – You can’t exactly do an “exchange” without having something to trade with, which is why currency is traded in pairs in Forex. Some examples of currency pairs are EUR/USD, JPY/USD, AUD/NZD. 
  
  The first quoted currency is the “base” currency while the latter is the “quote or counter currency”.
  
  For example, in the EUR/USD pair, the EUR is the base while the USD is the quote/counter.

• Major Pairs – It refers to currency pairs that have the USD in it as either base or counter currency. EUR/USD, USD/CHF are examples.

• Cross Pairs and Exotics – Major currency pairs that don’t include the USD. They are known to have higher volatility and transaction costs compared to major pairs. AUD/NZD, EUR/CHF, EUR/GBP are examples.

• Exchange Rate – Or simply known as the “Price”. It shows how much the base currency is priced in terms of its counter or quote currency. If you see online that EUR/USD is priced at 1.14, it means it costs 1.14 USD dollars to purchase a single EUR dollar. 

• Bid & Ask Price – The Bid price is the price that buyers are willing to purchase the currency pair while the Ask price is the price at which sellers are willing to sell their currency pair.

• Spread –  It’s the cost of making a trade, as it’s the difference between the bid and ask price of a particular currency pair. If the buy price is 0.99999 while the ask price is 0.99995 then it means the spread is 0.00004 (or 0.04 pips). Most, if not all forex trading platforms will show this info upfront for each pair.

• Leverage – It’s the multiplier at which you are allowed to trade than your initial trading funds will allow. It’s expressed in terms of ratio. For example, you’ll see retail brokers offer 10:1, 30:1, 50:1, and even 100:1 leverage ratios.
  
  For a 10:1 leverage, it means your Php1000 can “have” a value of Php10,000 and actually trade using that amount. But while that sounds awesome (since you can trade at a much larger asset-size position), it also means you get to lose bigger as it also multiples your loss by the same amount.   

• Lot – Refers to the number/amount of currency you will trade. It’s categorized into 4 main sizes: Standard, Mini, Micro, and Nano. 
  
  • Standard lot – 100,000 units
  • Mini – 10,000 units
  • Micro – 1,000 units
  • Nano – 100

The larger the lot, the bigger “change in value” in terms of pips it entails.

For example, when you trade a standard lot for EUR/USD as the base currency, 1 pip is equivalent to $10. If your position in this particular trade gained you 5 pips, it essentially means you gained $50. 

Under the same conditions but with a smaller Mini lot (10,000 units = $1 per pip), your 5 pips gain will result in an actual dollar gain of $5. 

• Margins – It’s considered as the minimum deposit or collateral to trade. It’s related to leverage (see above) as it ensures that you meet the minimum required funds in your account to trade using the leverage position you opted for. It’s calculated by dividing the lot size with the leverage amount
  
• Margin Call – Margin is the amount of money a trader needs to maintain in their account to keep their positions open. If the account falls below the required margin level, the broker may issue a margin call, which requires the trader to add more funds to the account or close out their positions.
  
  If the trader fails to meet the margin call, the broker may liquidate their positions to cover the losses, which can result in significant financial losses for the trader.

• Volume – refers to the number of lots traded within a specified time frame for a specific currency pair or in the entire market. When used in the context of trading, it refers to the amount of currency being bought and sold. 

• Slippage – refers to the difference between the price you expect for a pair and the actual price it was executed on. Market movements and speed of execution are some of the main causes of slippage. 

• Metatrader 4 / Metatrader 5 – A popular software platform for forex trading.

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Why You Should Trade Forex (Pros)

• Highly liquid
  • The huge number of trades being done on a daily basis makes the forex market a highly liquid one. Banks, companies, individuals—all take part in the buying and selling of currency. This translates to transactions being completed swiftly and conveniently, providing opportunities for traders to speculate on currency price.

• Wide variety of currency pairs to choose from
  • Choose from major, minor, emerging, or exotic pairs. The vast set of currencies to pick and trade gives traders plenty of flexibility in terms of investment and diversification.

• You can trade anytime
  • The Forex Market is open 24 hours daily, allowing anyone from any part of the world to trade at their convenience. 

• Go long or short
  • You can strategize long term (purchase pairs in the hopes that it will go up in value in the future) or go short, which is to gain a profit when the value goes down.  

• Leverage
  • This concept in Forex allows you to open trades at a much larger position as long as you’re able to pay the “deposit” fee. Trading on a margin allows you to gain big profits for a relatively small base of funds. But it goes the other way too, as leverage amplifies the losses too and may go beyond your deposit. 

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Why You Shouldn’t Trade Forex (Cons)

• High risk
  • Since forex trading is a highly speculative endeavor, the level of risk can be quite high. Aside from this, there are also plenty of non-legit forex brokers out there whose sole aim is to con people into losing their money and use it for their own gain. This is why it’s important to choose your broker carefully and make sure they are certified and have a generally solid operational background.

• Highly volatile market
  • While the high volume of trading forex makes it highly liquid, it also makes the movement of currency pairs exceptionally volatile. Speculating on price movements in either direction can thus be rather difficult, as you’ll never know when you’ll make the right trade and when the market will turn against you. 

• Locally, it’s currently deemed as an illegal activity by the SEC (at least for now)
  • If you checked the links in the initial paragraphs of this article, you already know that as of 2018, the SEC basically advised the public to “stop engaging in Foreign Exchange Trading and to stop investing in foreign-registered investment platforms of commodity futures, contracts for difference,  indices, binary options and the like”. 

However, this decision could be lifted in the future once the proper regulations have been put in place. 

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How to Invest in Forex

While that current SEC memorandum on Forex can be disheartening if you’re keen on trading ASAP, you can use this time to learn as much as you can and practice on demo accounts.

Build up your knowledge and familiarize yourself with the best practices so that once forex trading gets the thumbs-up from the SEC, you’ll be more than ready to invest in Forex.

1. Learn the basics first

Understand the key concepts, how forex trading works, how you can profit and lose money from trading, and how to efficiently trade without taking on too much risk.

There are plenty of educational materials available on the web (YouTube has some great content teaching basic and advanced stuff) that are available for free.

This is important as this will set the foundation for your learning. It will help you understand markets and the ins-and-outs of forex trading.

2. Pick a forex broker and utilize the demo account

All forex brokers mentioned in our list below feature the following capabilities:

• Ability to trade via a web browser
• Mobile app
• MT4 and MT5 support (except for eToro)
• Provides educational tools and materials for advancing your knowledge
• Some provide a copy trading feature which allows users to mimic strategies and the portfolio of well-known traders

Almost all forex brokers provide a demo account for “practice”. Take advantage of it and learn as much as you can in terms of using them and testing out what you learned.

The lessons you’ll gain from it can prove to be invaluable once you’re doing live trading. Some brokers offer better educational materials than others, so that might be a consideration as well when taking your pick.

A word of warning: there are plenty of non-legit and unregulated forex brokers out there.

It’s actually one of the main reasons why the SEC advised the public to refrain from dabbling in forex, to protect them against scams and fraudulent transactions.

When picking a broker, make sure to do your due diligence and learn everything you can about them to make sure you’ll be dealing with a company with a proven track record and are recognized and regulated in their home countries and the countries they are allowed to operate on.

3. Set up your own system for trading

Investing your money in something that has the potential to grow or lose quickly can be a highly emotional thing.

A trading plan/strategy can help do much of the lifting when it comes to decision-making.

You’re basically having a “pre-planned” solution for any position you wish to take, akin to a flow chart ready to run your choices through a gauntlet of If-this, then-that conditions. 

4. Get ready to trade

Armed with enough info and practice from your demo accounts (hopefully), you can begin trading. It all starts by opening a deal ticket for your chosen market, wherein you’ll see a buy and sell price quotation for it.

You can set the size of your position (leverage) and indicate your preferred stop/limit orders that will immediately close a trade once it hits a certain condition/level.

Monitor your gains and losses from the “open positions” section of your chosen platform. When you want to close your position, make the opposite trade to when you opened it.

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The Best Forex Brokers in the Philippines

Trading is done through forex brokers. They are firms that give traders access to a platform that will let them buy and sell currencies. 

All brokers mentioned on this list are not regulated by the SEC.

However, all of them have corresponding regulatory approval (at least one) from their country of origin, with most on the list having multiple regulatory recognition from various countries. 

1. eToro

Established in 2007, this Israeli fintech startup was one of the pioneering online social trading brokers.

Their CopyPortfolio program provides newbies with a structure/template for trading strategy by mimicking the moves and investments of other successful traders. They offer a selection of assets to trade, which includes stocks, CFDs, and crypto assets alongside forex.

eToro is considered to be one of the largest trading platforms within the last couple of years.

• Established: 2007
• Headquarters: They have offices in the USA, UK, Australia, Europe
• Regulated by: CySEC, FCA, ASIC
• Minimum Deposit: $200
• Trading Platforms: Proprietary Web, Mobile Apps
• Deposit & Withdrawal Options: Wire transfers, bank transfers, Visa, MasterCard, NETELLER, PayPal, Yandex, Webmoney UK, Skrill, etc.,
• Fixed Spread: YES
• Mobile Trading: iOS, Android
• Leverage: 30:1

Pros:  

• CopyPortfolio program is helpful for newbie investors
• Seamless account opening
• Wide range of assets to trade (not just forex)

Cons:

• Relatively high fees for forex trading 
• Withdrawing money is slower compared to others

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2. FXTM

Based in Limassol, Cyprus, ForexTime—also known as FXTM, started operations in 2011.

They have expanded globally over the years and have multiple representative headquarters in countries like Germany, China, Turkey, South Korea, France, Spain, Italy, and many more.

• Established: 2011
• Headquarters: FXTM Tower, 35 Lamprou Konstantara, Kato Polemidia, 4156, Limassol, Cyprus
• Regulated by: CySEC, FCA, FSCA, IFSC, FSC
• Minimum Deposit: $10
• Trading Platforms: MT4, MT5
• Deposit & Withdrawal Options: Credit Card, E-wallets, Bank Wire, Cryptocurrencies
• Fixed Spread: NO
• Mobile Trading: iOS, Android
• Leverage: Up to 1:30 for EU (unless pro) / Up to 1:1000 for non EU

Pros:  

• Low minimum deposit
• Tight spreads
• MetaTrader 4 and MetaTrader 5 platform support
• Easy withdrawals

Cons:

• Maximum order size is low
• Native Mac desktop app support inexistent

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3. AvaTrade

AvaTrade distinguishes itself from the competition by having a financial firm backing and a user-oriented approach in its Forex trading business. They also offer a wide variety of CFD instruments, like stocks, bonds, cryptocurrency, ETFs, trade commodities, and Indices. 

AvaTrade boasts of having more than 20,000 global clients who complete an average of 2 million transactions/trades per month. Its monthly trading volume is above $USD 60 billion. 

• Established: 2006
• Headquarters: Dublin, Ireland
• Regulated by: ASIC (Australia), IIROC (Canada), FSP (S Africa), FSA (Japan)
• Minimum Deposit: $100
• Leverage: 30:1
• Trading Platforms: Proprietary Web, Mobile Apps, Meta Trader 4, Zulu Trade, Mirror Trader
• Deposit & Withdrawal Options: Credit Card, E-wallets, Bank Wire, Cryptocurrencies
• Fixed Spread: YES
• Mobile Trading: iOS, Android

Pros:  

• New member bonus
• Its own AvaTrade platform is robust and easy to use and available for both mobile and desktop
• Low trading fees
• Plenty of tools and educational material

Cons:

• Inactivity fee
• Admin fee

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4. XM

XM was established in 2009 by Trading Point Holding, its parent company. Like the first two companies on our list, they are a global FX and CFD broker.

They have more than 2.5 million customers spread out among 196 countries globally. Overall, XM has executed more than 1.4 billion transactions since its inception.

• Established: 2009
• Headquarters: Belize City, Belize / Cyprus offices
• Regulated by: ASIC (Australia), IIROC (Canada), FSP (S Africa), FSA (Japan)
• Minimum Deposit: $100
• Leverage: Varies on the type of account
• Trading Platforms: XM Web Trader, Mobile Apps, Meta Trader 4 and 5
• Deposit & Withdrawal Options: Credit Card, E-wallets, Bank Wire, Cryptocurrencies
• Fixed Spread: NO
• Mobile Trading: iOS, Android

Pros:  

• Tight spreads
• Excellent educational tools
• Low CFD and withdrawal fees
• Easy to open an account with

Cons:

• Higher spreads on micro and standard accounts
• Inactivity fee

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5. IG

One of the oldest companies in this list, IG was established in the UK in 1974 and is currently one of the largest CFD brokers in the world.

It’s publicly-listed on the London stock exchange and has 10 regulatory approval from multiple countries across the globe.

• Established: 1974
• Headquarters: United Kingdom
• Regulated by: FCA, BaFin, FINMA, CFTC, ASIC, FMA, MAS, FSA, FSCA, DFSA 
• Minimum Deposit: None
• Leverage: 30:1
• Trading Platforms: XM Web Trader, Mobile Apps, Meta Trader 4 and 5
• Deposit & Withdrawal Options: Credit Card, E-wallets, Bank Wire, Cryptocurrencies
• Fixed Spread: NO
• Mobile Trading: iOS, Android

Pros:  

• No withdrawal and deposit fee
• Highly regulated (multiple countries)
• Low withdrawal and CFD fees
• Excellent implementation of trading platform

Cons:

• Inactivity fee (applies only after 2 years of inactivity)
• Verification of account is longer than average (3+ business days)

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6. Alpari International

Alpari International is based in Mauritius under their parent company, Exinity Limited. They offer over 60 currency pairs and crosses and have their own copy-trading program.

Their wide range of trading accounts (Micro, Standard, ECN, and Pro) offers a variety of commission-free trading, copy-trading, different leverage amounts, and institutional-grade spreads.

• Established: 1998
• Headquarters: Mauritius
• Regulated by: FSC
• Minimum Deposit: $5
• Leverage: 1000:1 (ECN)
• Trading Platforms: Meta Trader 4 and 5, Mobile app
• Deposit & Withdrawal Options: Credit Card, E-wallets, Bank Wire, Cryptocurrencies
• Fixed Spread: NO
• Mobile Trading: iOS, Android

Pros:  

• Wide range of trading accounts, some offering commission-free trading
• 1000:1 leverage
• Access to Alpari’s own Copy Trading program

Cons:

• Education and research tools are lacking compared to others

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7. FX Pro

FX Pro was founded in 2006 and is headquartered in the United Kingdom. Since inception, the company boasts of executing more than 250 million trades.

It operates in 173 countries currently with more than 870,000 customers. In 2017, they were voted as U.K.’s most trusted Forex brand by Global Brands Magazine.  

• Established: 2006
• Headquarters: United Kingdom
• Regulated by: CySEC, DFSA, FCA, FSCA, SCB
• Minimum Deposit: $100
• Leverage: 500:1 
• Trading Platforms: cTrader, MT4, MT5, Proprietary web
• Deposit & Withdrawal Options: Credit Card, E-wallets, Bank Wire, Cryptocurrencies
• Fixed Spread: YES
• Mobile Trading: iOS, Android

Pros:  

• Transparent and competitive pricing
• Tight spreads
• Registration is fast and easy
• MT4 & ECN support

Cons:

• Relatively high fees
• Educational materials could be improved

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8. Hot Forex

HotForex is a CFD and Forex broker under the company HF Markets Group. Founded in 2010, they have quickly risen to be one of the top names when it comes to foreign exchange trading.

They currently feature 49 currency pairs and offers 3 types of trading accounts to choose from. They have multiple regulatory approvals from various countries.

• Established: 2010
• Headquarters: Cyprus
• Regulated by: CySEC, DFSA, FCA, FSA, FSCA
• Minimum Deposit: $5
• Leverage: 1000:1 
• Trading Platforms: cTrader, MT4, MT5, Proprietary web
• Deposit & Withdrawal Options: Credit Card, E-wallets, Bank Wire, Cryptocurrencies
• Fixed Spread: NO
• Mobile Trading: iOS, Android

Pros:  

• Competitive spreads
• Commission-free trading available
• Meta trader support and provides plenty of tools (including AutoChartist)

Cons:

• Range of products to trade are limited compared to others

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9. FXCM

This UK-based company was founded in 1999 and was acquired by ODL Group in 2010 (also based in the UK) to quickly become one of the largest forex brokers in the world.

They are known to have excellent implementation when it comes to its trading platform and social copy trading, plus above-average customer service.

• Established: 2010
• Headquarters: Cyprus
• Regulated by: CySEC, DFSA, FCA, FSA, FSCA
• Minimum Deposit: $50
• Leverage: 1000:1 
• Trading Platforms: cTrader, MT4, MT5, Proprietary web
• Deposit & Withdrawal Options: Credit Card, E-wallets, Bank Wire, Cryptocurrencies
• Fixed Spread: NO
• Mobile Trading: iOS, Android

Pros:  

• Social/copy trading platforms
• Low minimum deposit

Cons:

• Limited range of tradable products

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10. CMC Markets

Founded in 1989, CMC Markets is one of the oldest companies in this list. They have a large product catalog that spans beyond forex and serves more than 50,000 customers across the globe.

They are known for their newbie-friendly approach, offering free live accounts along with tons of free educational materials and competitive spreads.

• Established: 1989
• Headquarters: London
• Regulated by: ASIC, FCA
• Minimum Deposit: None
• Leverage: 500:1 
• Trading Platforms: cTrader, MT4, MT5, Proprietary web
• Deposit & Withdrawal Options: Credit Card, E-wallets, Bank Wire, Cryptocurrencies
• Fixed Spread: NO
• Mobile Trading: iOS, Android

Pros:  

• Low spread offering across all account types
• Can be a good fit for newbie traders

Cons:

• Lacks a social/copy trading feature

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10 Forex Trading Tips

A lot of traders start Forex trading thinking they’ll be instant millionaires. However, it simply doesn’t work that way.

To be a successful forex trader, you need to have a clear understanding of the market and the strategies that work best for you. Here are a few tips to help you get started.

1. Choose the best broker for you

When it comes to choosing the best broker for your forex trading needs, don’t skip the research part. Look for brokers with a good reputation and a proven track record of success.

Don’t be swayed by flashy advertising or promises of quick riches. Check out the broker’s website and read reviews from other traders to get a sense of their reliability and customer service.

You can even ask your friends for recommendations.

2. Know different markets

Forex trading does not exist in isolation.

Meaning, it’s interconnected with different financial markets. When you understand these relationships, you can make better trading decisions that can help you capitalize on market movements.

This may take time but it will help you to become a more well-rounded trader in the long run.

3. Learn how to forecast the market’s “weather conditions” through proven and tested strategies

Just like meteorologists forecast the weather by analyzing various factors, forex traders forecast the market by analyzing various economic indicators and events.

To become a successful forex trader, you need to learn how to forecast the market’s conditions accurately through the following strategies, tools, and techniques:

Technical Analysis

Technical analysis involves using charts and technical indicators to analyze past market movements and identify potential future trends.

This can help you forecast the market’s direction. Some popular technical indicators include moving averages, Bollinger Bands, and RSI.

Fundamental Analysis

Fundamental analysis involves examining economic, financial, and other qualitative and quantitative factors that can impact the market.

This includes things like government policies, GDP figures, inflation rates, and interest rates.

Combination of technical and fundamental analysis

While technical and fundamental analysis are both useful in their own right, the most successful forex traders know how to combine the two to make finer trading decisions.

By using both approaches, traders can get a clearer picture of the market’s “weather conditions” and make trades that are backed by both quantitative and qualitative data.

Economic calendar

This is an important tool for forex traders to stay on top of upcoming economic events and indicators that could potentially impact the market.

By staying informed about things like central bank announcements, employment data releases, and geopolitical events, you can trade better. 

Pattern recognition

Pattern recognition is an essential skill for any successful forex trader. As you become more experienced in the market, you will start to notice patterns in price movements and market behavior.

For example, a trader may notice a recurring pattern of the market dipping during a certain time of day, and use that information to make profitable trades.

Sentiment analysis

This involves gauging the overall attitude of market participants towards a particular asset or the market as a whole.

This is usually done by analyzing social media sentiment, news articles, and other sources of market commentary.

When you understand market sentiment, you can position yourself to take advantage of current market trends.

Correlation analysis

Examining and understanding the relationship between two or more currency pairs, markets, or commodities can help you identify potential trading opportunities or risks.

For instance, the price of gold and the value of the US dollar have an inverse correlation so as the value of the dollar goes up, the price of gold goes down.

Backtesting

You can also use historical data to test a trading strategy or system. By analyzing past market movements, you can evaluate the effectiveness of your chosen strategy in real-world scenarios.

This strategy allows you to identify potential flaws in your strategy or refine your approach before committing real money to the market.

Demo trading

Before jumping into the real forex market, it’s always a good idea to practice demo trading first. Most brokers offer demo accounts that allow you to trade with virtual money and test out different strategies.

This can help you gain experience and confidence in your trading abilities without risking any real money. Moreover, it’s also a great way to try out different brokers and trading platforms before committing to a real account.

4. Take time to develop your trading style

Not all trading styles will work for you. Develop your own unique style that suits your personality, risk tolerance, and overall trading goals.

This can take time and may require experimentation with different approaches. However, it’s crucial to find what works best for you.

Some traders prefer a more conservative approach, while others may be comfortable taking on more significant risks.

Regardless of your approach, take the time to develop a strategy that aligns with your objectives and allows you to trade with confidence and consistency.

5. Don’t get disheartened if you lose money

Losing money is a natural part of forex trading. Even the most experienced and successful traders have lost money at some point in their careers.

What’s important is how you handle those losses and learn from them. Treat each loss as a learning opportunity and use it to refine your approach and improve your trading strategy.

Remember, forex trading is a long-term game, and it’s essential to stay disciplined, patient, and consistent in your approach. With time and experience, you can become a successful forex trader.

6. Always have a plan in place 

Your trading plan should include things like your preferred trading style, the currency pairs you want to trade, your risk tolerance, and your profit targets.

You should also have a clear understanding of your entry and exit points and the indicators or factors that will trigger a trade.

Additionally, plan for different market scenarios. If the market experiences a sudden shift or volatility, you should know how to react and adjust your strategy accordingly.

Having a contingency plan in place can help you stay calm and make rational decisions in the event of unexpected market movements.

7. Protect your capital and know your limit

Protecting your capital is paramount in forex trading. Set a limit on the amount of money you are willing to risk per trade and stick to it.

Never place trades that exceed your risk tolerance or put your entire trading account at risk.

It’s also essential to use risk management tools like a stop-loss order which will automatically close a trade once it reaches a specific price.

This can help minimize potential losses and protect your capital in the event of unexpected market movements.

Following this tip will also help you avoid overtrading. This mistake can make way for emotional decision-making and potentially harmful mistakes.

Once you have reached your limit, step away from the market and take a break.

8. Don’t let your emotions rule you

Emotions can be one of the biggest hurdles to successful forex trading. Fear, greed, and impatience can all lead to poor decision-making and potentially harmful mistakes.

It’s essential to remain disciplined and level-headed in your approach to trading.

Additionally, don’t let temporary market movements or external factors influence your decisions. Instead, rely on your analysis and trading plan to guide your actions.

Finally, maintain a healthy balance between trading and other aspects of your life. Never let forex trading consume all your time and energy.

This can lead to burnout and a heightened risk of making emotionally-driven trading mistakes such as “revenge trading.” 

9. Have a printed record

Keeping a printed record of your trades and activities can help you track your progress and identify areas for improvement.

It’s imperative to record the date, time, currency pair, entry and exit points, profit or loss, and any other relevant information.

This can help you identify patterns or trends in your trading behavior and adjust your strategy accordingly. 

10. Always keep learning

Stay up-to-date with the latest trends, news, and developments. As much as you can, keep learning and expanding your knowledge.

Attend webinars, read books and articles, and connect with other traders to share insights and strategies.

You can even seek feedback from experienced traders and learn from their experiences. Trading communities and forums can also be a valuable resource for gaining insights and learning from the experiences of others.

Finally, be willing to adapt and adjust your approach as needed. As the market changes and evolves, so should your trading strategy.

Staying flexible and open-minded can help you stay ahead of the curve and achieve success.

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Forex Trading FAQs

Still got questions about forex trading? We’ll answer them below.

Is Forex Trading legal in the Philippines?

Forex trading in the Philippines has been deemed illegal by the Securities and Exchange Commission (SEC) because of numerous scams and fraudulent financial advisors that have resulted in significant losses for Filipinos. Although, trading is permissible if all established rules are followed.

How does the forex market differ from other markets?

The forex market differs from other markets in several ways. First, it is a highly liquid market that operates 24 hours a day, five days a week. Traders can buy and sell currencies at any time, making it a convenient market for those who cannot trade during regular business hours.

Second, the forex market is decentralized, meaning that it has no physical location or central exchange. Instead, it operates through a global network of banks, brokers, and other financial institutions.

Finally, the forex market is highly volatile. Exchange rates fluctuating rapidly in response to economic and geopolitical news and events and this can create both opportunities and risks for traders

What are the major currency pairs?

The major currency pairs are the most frequently traded pairs in the forex market. These pairs include:

• EUR/USD
• USD/JPY
• GBP/USD
• USD/CHF

How do forex brokers make money?

Forex brokers make money through spreads, which are the difference between the bid and ask price for the trade.

Some brokers may also earn money through other services, such as offering educational resources or providing access to trading algorithms.

What are the risks involved in forex trading?

Forex trading involves a high level of risk, as exchange rates can fluctuate rapidly and unpredictably.

This means that traders can experience significant losses if they do not have a solid understanding of the market and effective risk management strategies in place.

Another risk is the use of leverage. Leverage allows traders to control larger positions than what they can afford, but it also increases the potential for losses.

Traders should use leverage with caution and have a solid understanding of how it works.

How do I choose a reliable forex broker?

Always assess the following when choosing a forex broker:

• Reliability and Trustworthiness

It’s no secret that the forex market involves huge financial transactions. This is why it’s crucial to choose a broker that is reputable and has a good track record throughout the years.

This will help ensure that your money stays secure.

• Trading Platform

The broker’s trading platform will be your main tool for executing trades. Make sure to choose a broker that offers a platform that is user-friendly and easy to navigate.

A good trading platform should also offer you various technical indicators and charting tools to help you analyze the market so you can make more informed decisions.

• Spreads and Fees

Look for a broker that offers competitive spreads (the difference between the buying and selling price) since this can help you maximize your profits.

Some brokers also charge additional fees for things like withdrawals or inactive accounts, so make sure to read the fine print before you sign up.

• Customer Support

In the world of forex trading, customer support can make or break your experience. Look for a broker that offers 24/7 support through various channels, such as email, phone, or live chat. A good broker should have knowledgeable and helpful representatives that can assist you with any issues or questions you may have.

• Account types

Most brokers will have multiple account types that cater to different traders’ needs.

For instance, some brokers may offer a standard account with a lower minimum deposit requirement, while others may offer a VIP account with more advanced features and perks.

What is a forex trading strategy?

A forex trading strategy is a set of rules and guidelines that a trader uses to make trading decisions.

A good trading strategy should take into account a trader’s risk tolerance, current market conditions, financial goals, and trading experience.

Some of the most popular trading strategies include scalping, day trading, swing trading, and position trading. 

How do news events affect forex trading?

News events can have a significant impact on forex trading. Economic data releases such as GDP and employment reports, can cause market volatility and affect currency exchange rates.

Furthermore, geopolitical events like elections or trade agreements can also have a major impact on the market.

Traders must always stay up to date about upcoming events and be prepared to adjust their trading strategy accordingly.

Some traders even choose to avoid trading during times of high volatility to minimize risk.

What is technical and fundamental analysis?

Technical analysis and fundamental analysis are two different approaches to analyzing the forex market.

Technical analysis involves studying charts and using technical indicators to identify patterns and trends in the market. Traders who use technical analysis believe that historical price data can provide insights into future price movements. 

On the other hand, fundamental analysis involves studying economic and political events that can affect the market. Traders who use fundamental analysis look at factors like interest rates, inflation, and government policies to determine the value of a currency. They believe that these factors can provide insights into the long-term direction of the market.

Both technical and fundamental analysis can be used to inform a trader’s decision-making process. Some traders rely more heavily on one approach than the other, while others use a combination of both.

Are profits from forex trading taxable?

Yes. Forex trading is considered by the BIR as “ordinary income” making it subject to income tax.

Can I start forex trading with a small capital? Is forex trading suitable for everyone?

Yes, it is possible to start forex trading with a small capital. However, it is important to keep in mind that trading with a small capital means that your potential profits will also be small.

It’s worth noting that forex trading is not suitable for everyone. It requires a significant amount of time and effort to develop the necessary skills and knowledge to become a successful trader.

It’s also important to have a high tolerance for risk, as forex trading involves a high level of volatility and unpredictability. That said, with dedication and the willingness to learn, anyone can become a successful forex trader.