How to get started with Forex Trading in the UK

In the world of investments, there are many ways to make money. Some are dull and only fit for certain personality types while others are exciting but highly risky. Of course, risk and return tend to move in the same direction, and therefore investors looking for high returns must be ready to take high risk. Forex trading falls in the exciting, but a highly risky category.

However, the risk can substantially be minimized by having a deeper understanding of how the industry works and keeping updated on the latest developments.

In this guide, you will get an overview of forex trading and what you need to become a successful forex trader in the UK.

Forex Trading in the UK

In the recent past, the UK has been on the limelight for the increasing interest in forex trading. People are discovering that there are immense opportunities to make money in forex trading and are therefore flocking to brokers in large numbers.

The increased interest in forex trading has attracted both local and international dealers, most legit, and some fake. This means that a beginner trader who fails to invest in forex education is likely to be scammed.

While forex trading has its fair share of millionaires and billionaires in the UK, it is not without “Nillionnaires.” On a lighter note, a nillionnaire is a person who makes nil money in an investment.

The recipe to becoming a “nillionnaire” in forex trading includes jumping in with both feet before learning, choosing a broker just because they have a sexy name, and wanting to join Forbes list of the world richest in the first day of trading.

Beginner traders should take advantage of available free learning resources on our website and around the web. It is important to note that paid resources are also available, but care should be taken to ensure that only the best are selected.

With the robust growth of Forex trading in the UK, individuals claiming to be forex trading trainers are sprouting from every corner with unrealistic promises to beginners.

It is therefore paramount to vet a paid forex trading trainer before paying them to train you.

What is Forex Trading?

Before we look at Forex trading, let us review how currencies work in the international market. Every day, individuals and institutions use fiat money to buy goods and services either locally or internationally. When operating globally, they must convert their local currencies to the target country currency to be able to transact.

Case in point, a businessperson in UK importing goods from China and is required to make payments in Chinese Yuan, must convert his British Pound to the Yuan. In other words, they must sell the British Pound to buy the Yuan.

Currencies fluctuate in prices depending on underlying fundamentals such as inflation, interest rates, political stability and government debt. These factors create demand and supply which in turn determines the direction that a currency takes.

For instance, if there is political instability in UK, foreign investors and business persons will not want to invest or do business here, and hence the demand for the British Pound will go down.

The fall in demand means that the value of the Rand will decline relative to another politically stable and equally or more competitive country.

Forex trading, short form for foreign exchange trading, involves simultaneous buying and selling of currency pairs with the aim of profiting from the prices fluctuations.

For example, if one expects the British Pound to weaken relative to the US dollar, they can sell the weakening British Pound for the strengthening dollar.

Consequently, they will profit from buying low and selling high on the dollar and selling high and buying low on the British Pound that is if they decide to repurchase it later when the prices hit rock bottom.

Unlike stocks trading, which mostly occurs in a centralized exchange, Forex trading happens exclusively over the counter. Forex is the largest financial market in the world with trades amounting to a staggering $5.1 trillion every day. The market is open 24 hours a day 5 ½ days a week from Sunday, 5 pm EST to Friday 5 pm EST.

In a nutshell, here are interesting facts about Forex.

  • Forex trading mainly involves the seven most liquid currency pairs in the world.
  • Speculators make up almost 90% of forex trading volume.
  • The UK is the world biggest forex market.
  • In every 10 forex traders, 1 is a woman.
  • Globally, 1 out of every 786 people is a forex trader.
  • 1/6 of all forex traders in Africa are from SA.
  • 65% of all online forex traders are between ages 18 to 34.

Forex traders include banks, investment firms, hedge funds, and individual investors.

Becoming a Successful Forex Trader

Like in any other parts of the world, anyone in the UK with a stable internet connection and with capital as low as 100 Rand can trade forex.

However, to be a successful trader, you must consistently invest in learning by reviewing the many freely available forex trading guides and practising through a demo account.

Contrary to what many beginners think, forex trading is not a get rich quick scheme.

Here are six steps to becoming a successful forex trader in the UK.

  • Improve your knowledge by reviewing as many freely available forex trading guides as possible.
  • Get a trading mentor or trainer if possible.
  • Practice your trading skills through a demo account.
  • Open a live mini account with a reputable broker.
  • Develop a trading strategy that is fit for you.
  • Upgrade your trading account.

Each of the above steps is explained in details in our forex trading resources.

Beginner traders should put it in mind that forex trading is a high risk-high return form of investment and therefore they should not trade with money that they cannot afford to lose.

You can choose a broker either locally or internationally depending on what is convenient for you. Either way, reputable brokers can be found here in the UK and abroad and therefore your choice should depend on what you are comfortable with.

It is important to note that when it comes to funds transfer, dealing with a locally based broker is easier than an internationally based one. However, this depends on the modes of transfer preferred by the individual trader.

Picking the Best Forex Broker in the UK

When it comes to choosing a new forex broker, beginner traders should conduct proper due diligence to ensure that they only settle for the best.

With the many UK forex brokers available, this can be a daunting task especially for those who do not know what and where to look.

Here are some of the questions every trader should ask when choosing a forex broker.

  • Are they licensed by a regulatory body?
  • What are their transaction rates?
  • How easy is it to withdraw funds from their trading accounts?
  • Do they have a user-friendly and stable trading platform?
  • Do they have a variety of accounts to choose from?
  • How is their customer service?

In the UK, the Financial Conduct Authority (FCA) is the regulatory body responsible for licensing forex brokers.

Internationally, renowned regulatory bodies include the National Futures Association (NFA) and Commodities Futures Trading Commission (CFTC) both from the US. Others include FCA and PRA from the UK, ASIC from Australia, BaFin from Germany, AMF from France, and SAFE from China.

Regarding transaction costs, it is important to note that the cheapest brokers are not always the best. Traders should conduct thorough research both online and from peers before settling on a Forex broker.

FCA Forex Regulation

With the high number of scam artists today who are claiming to offer forex trading services, it is important for every trader to ensure that their broker of choice is certified.

In the UK, the Financial Conduct Authority is the regulatory body that ensures that all financial services are conducted in a legit and transparent manner.

One can determine whether a forex broker is licensed by checking on the FCA website. A search on the website should also reveal whether the broker has been involved in scandals.

Reading online reviews is a good starting point when conducting due diligence.

Getting Started with Forex Trading in the UK

A million-dollar jackpot winner once heard his friends boasting how they had tripled their savings through Forex trading.

So he went home, opened a live account with a random broker, deposited a big portion of his money, and made some random buy orders. In the next ten minutes, his account balance was wiped out.

Today, the man is a street sweeper somewhere in the inner cities of Karachi, Pakistan.

In Forex trading, the action begins in learning. If someone tells you that you can start making money almost immediately with no background knowledge, they are lying to you.

The best place to start is to orient yourself with the basics and do some demo trading before you dip your feet into a live account:

STEP 1.) Open up a demo trading account with one of the UK’s best Forex Brokers.

STEP 2.) Educate yourself with all our free trading resources from In-depth guides to tips & strategies.

STEP 3.) Use your demo account too practice trading & implement what you are learning.

So How can Money Vice help you?

Money Vice is a leading financial advice blog, our resources include trading guides, forex signals, trading tips & weekly financial news.

Good Luck!

This article was put together by our in-house financial experts.