Trading Forex Online in Canada: What Novice Traders Should Know

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In recent years, there has been a boom in online trading in Canada and, indeed, worldwide. There are several reasons for this, including the regulation of the trading market, superior technology, and standalone incidents like the COVID-19 pandemic lookdowns, the latter of which saw a huge surge in retail trading.

Nonetheless, Canadians now have the opportunity to access markets for trading and investment in gold, stocks, cryptocurrencies, indices, bonds, and, of course, the biggest market of all – foreign exchange.


What Is Forex?

What Is Forex

Forex is a portmanteau of foreign exchange, i.e., the exchanging of one country's currency for another.  That’s the simple explanation, and it is something that anyone who has been through an international airport will understand. And they will also understand that various factors influence the value of one currency against another.

However, when we ask, what is forex trading? We get into a much more sophisticated – and, arguably, interesting – area. Forex trading, sometimes known as FX trading, can be as simple as buying one currency with another and hoping that the value of your purchased currency rises. Yet, with FX trading, there is a wealth of other options to trade. Indeed, it is often the case that you don’t have to actually buy the underlying currency to trade forex.


Forex Trading in Canada

Canada has a fully-regulated forex trading market. Online, you will find platforms that comply with the CSA (Canadian Securities Administrators) and IIROC Investment Industry Regulatory Organization of Canada). You should only ever trade forex – or any other financial product – with an online broker licensed in your country.

This way, you’ll know the broker is trustworthy, and you’ll also have certain protections for your money.


The Global Marketplace

Forex is the world’s biggest financial market. In fact, it dwarfs all other markets, with volumes (the amount of money traded) sometimes reaching $CAD 10 trillion on a daily basis. The annual market volume is measured in quadrillions of dollars. It is, in a word, immense.

Naturally, some of the big players in this global marketplace will be major banks and financial institutions, but the fintech revolution led the way for retail traders to get involved.


Retail Forex Trading

As a retail forex trader, you are not likely to have a goal of buying and holding a currency. Forex trading is not like trading stocks or buying gold. You won’t, for example, buy $CAD10,000 worth of Japanese Yen and wait for it to rise in value.

Investment banks might do this (on a much grander scale), but retail traders do not. You will more likely use financial contracts like derivatives or CFDs. Traders can also maximize their returns by using leverage, which is a kind of loan from the broker that helps enhance your position.


What Moves the Forex Market?

If you are new to forex trading, you’ll have a fair idea that currencies move up and down in value against each other. The reasons for this include:

  • Economic Performance of a Country
  • Inflation and Interest Rates of that Country’s Central Bank
  • The Attractiveness of Bond Yields

In addition, global economic conditions may strengthen certain currencies over others. In times of global prosperity, we tend to see money flow out of currencies like the US dollar and Swiss Franc. And in times of economic uncertainty, money flows into these currencies as they are regarded as safe havens. However, please be aware that these are generalizations, and currency markets don’t always do what traders expect.


Is Forex Trading Risky?

Is Forex Trading Risky

The short answer is that it is as risky as you make it. You can lose money trading currencies. However, most traders will set out a strategy, including mechanisms like stop-loss provided by the broker. Indeed, the best online trading platforms will provide plenty of guardrails to ensure that you do not overextend yourself. Remember, with all trading and investment strategies, you should only put forward what you can afford to lose.

If you gain experience and know-how, you may wish to risk more, but it is advisable to start small to get the feel of things. It’s worth noting that top trading platforms offer demo accounts, allowing you to practice before you start trading with real money.


The Last Word

When the economic history of the 21st century is written, it will likely be remarked upon that FinTech changed the course of finance. In effect, it brought financial trading and investment to the masses. Thirty years ago, the average Canadian wouldn’t have the option of trading forex or other financial products, at least not without the help of a Main Street financial manager.

Today that has all changed, and anyone with an internet connection can access a quadrillion-dollar marketplace. Nobody is guaranteed to succeed, but with a willingness to learn and put in some work, success in forex trading can be achieved.

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