If you’ve been wondering how you can start trading, then read this article. In this article, we’ll discuss what Forex trading is, how to choose a broker, and what tax implications are associated with it. Plus, we’ll talk about the benefits of this exciting new opportunity. In this article, we’ll cover the basics of foreign exchange trading, as well as what currencies you should be trading, and what brokers offer to UK investors.
Foreign exchange trading
The UK is one of the biggest markets for foreign exchange. The UK accounts for 44% of global US dollar trading and 90% of all FX trades in the country. UK FX trades are concentrated around the US dollar/euro pair, the most popular currency pairing worldwide. The US dollar/euro pair accounts for 28% of total FX turnover in the UK. Foreign exchange trading in the UK accounts for a considerable amount of turnover, but is highly speculative.
The volume of reported FX trading has increased in recent years, which is consistent with the shift from voice to electronic. This trend is increasing globally, with penetration of electronic trading in the UK reaching 58% over the last three years. UK-based e-trading has increased significantly for both developed and emerging market currencies, as well as for non-deliverable forwards. But the market is far from thriving. While the UK remains one of the world’s largest foreign exchange trading centres, the rise in reported FX volumes may not be indicative of a general trend.
The best currency to trade is the EUR/USD. This currency is the most liquid, and the price movement is logical. As a rule, EUR/USD has a negative correlation with USD/CHF and a positive correlation with GBP/USD. The euro’s relationship with the pound and the Swiss franc means that these two currencies will often move together. Beginners should choose the EUR/USD as their first currency pair and follow news closely.
When choosing a currency pair for trading, be aware of the currency’s volatility. While all Forex majors come with tight spreads, the GBP/USD currency pair is particularly volatile. Trading with a large spread can result in higher losses. While all forex brokers offer tight spreads, experts recommend trading with low spreads to minimize risk. The GBP/USD pair has a high volatility index, so it may not be appropriate for beginners.
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Choosing a broker
Unlike other countries, the UK is a leading financial hub, with every major economy represented in its financial sector. The UK offers a broad range of mobile trading opportunities, and its network of specialized outlets allows traders to access areas other brokers simply cannot reach. In addition, retail clients of regulated forex brokers in the UK have up to PS85,000 of compensation should their broker become insolvent. To get the most out of your forex trading in the UK experience, choose a broker that is regulated by the Financial Conduct Authority.
The FCA regulates the forex industry, and you can find their registration number at the bottom of the homepage. You can also search for any known clones on the FCA’s website. This information can be very useful in determining which forex broker is legitimate in the UK. Moreover, FCA-regulated brokers are the only ones legally allowed to accept UK clients. To avoid falling victim to fraudulent practices, choose a broker that is registered with the FCA.
Tax implications of forex trading in the UK
There are tax implications of forex trading in the UK. Depending on your situation, you may not be liable to pay personal income tax, capital gains tax, or Stamp Duty Reserve tax. For investors, a taxable profit from trading can include a capital loss. For those who are not in a high tax bracket, the 60%/15% option may be attractive. If you are a speculator and have a full-time job, you should consider setting up a company.
As a sole trader, you should be aware of the tax implications of forex trading in the UK. There are two types of tax liabilities, based on the amount of money you’ve made and the type of trading you do. If you’re a sole trader, the tax implications are much simpler than for investors who use spread betting or CFDs. Part-time traders can offset losses by using spread betting.
Choosing a platform
If you’re new to foreign currency exchange trading, choosing the right platform is essential. A UK forex broker has a range of platforms, including a proprietary trading system that allows you to trade through a direct market access (DMA) system. The list of recommended UK forex brokers is updated regularly and based on factors such as currency trading conditions and the range of the forex market. For example, OANDA, XTB, and xStation were all considered in the review. Other UK comparison pages also include these brokers.
There are numerous benefits to choosing a regulated broker. Regulatory frameworks provide a level of trust between broker and client. Regulated brokers will operate in a way that is ethical and avoid ripping off clients. The top platforms all have high trust regulators, and are authorized by the major industry watchdogs. This helps you to find a regulated broker without the hassle of switching brokers.