How to Make Money Trading Forex

How to Make Money Trading Forex

The forex (also known as FX or foreign exchange) market refers to the global marketplace where banks, institutions, and individuals speculate on the exchange rate between fiat currencies.

The forex market is the largest financial market in the world.

How does forex trading work?

As a forex trader, you are speculating on whether one currency will rise or fall in price against another currency.

So “forex trading” can be defined as the process of speculating on currency prices to try and make a profit.

The value of a currency is influenced by economic, political, geopolitical events, and trade and financial flows.

Placing a trade in the foreign exchange market is simple.

The mechanics of a trade are very similar to those found in other financial markets (like the stock market), so if you have any experience in trading, you should be able to pick it up pretty quickly.

And if you don’t, you’ll still be able to pick it up….as long as you finish School of Pipsology, our forex trading course!

The objective of forex trading is to exchange one currency for another in the expectation that the price will change.

More specifically, the currency you bought will increase in value compared to the one you sold.

Here’s an example:

Trader’s Action	EUR	USD
You purchase 10,000 euros at the EUR/USD exchange rate of 1.1800	+10,000	-11,800*
Two weeks later, you exchange your 10,000 euros back into U.S. dollars at the exchange rate of 1.2500	-10,000	+12,500**
You earn a profit of $700	0	+700

*EUR 10,000 x 1.18 = US $11,800
** EUR 10,000 x 1.25 = US $12,500

An exchange rate is simply the ratio of one currency valued against another currency.

For example, the USD/CHF exchange rate indicates how many U.S. dollars can purchase one Swiss franc, or how many Swiss francs you need to buy one U.S. dollar.

How to Read a Forex Quote

Currencies are always quoted in pairs, such as GBP/USD or USD/JPY.

The reason they are quoted in pairs is that, in every foreign exchange transaction, you are simultaneously buying one currency and selling another.

How do you know which currency you are buying and which you are selling?

Excellent question! This is where the concepts of base and quote currencies come in…

Base and Quote Currency

Whenever you have an open position in forex trading, you are exchanging one currency for another.

Currencies are quoted in relation to other currencies.

Here is an example of a foreign exchange rate for the British pound versus the U.S. dollar:

The first listed currency to the left of the slash (“/”) is known as the base currency (in this example, the British pound).

The base currency is the reference element for the exchange rate of the currency pair. It always has a value of one.

The second listed currency on the right is called the counter or quote currency (in this example, the U.S. dollar).

When buying, the exchange rate tells you how much you have to pay in units of the quote currency to buy ONE unit of the base currency.

In the example above, you have to pay 1.21228 U.S. dollars to buy 1 British pound.

When selling, the exchange rate tells you how many units of the quote currency you get for selling ONE unit of the base currency.

In the example above, you will receive 1.21228 U.S. dollars when you sell 1 British pound.

The exchange rate or “price” represents how much of the quote currency is needed for you to get one unit of the base currency

If you buy EUR/USD this simply means that you are buying the base currency and simultaneously selling the quote currency.

In caveman talk, “buy EUR, sell USD.”

• You would buy the pair if you believe the base currency will appreciate (gain value) relative to the quote currency.
• You would sell the pair if you think the base currency will depreciate (lose value) relative to the quote currency.

With so many currency pairs to trade, how do forex brokers know which currency to list as the base currency and the quote currency?

Fortunately, the way that currency pairs are quoted in the forex market is standardized.

You may have noticed that currencies quoted as a currency pair are usually separated with a slash (“/”) character.

Just know that this is a matter of preference and the slash may be omitted or replaced by a period, a dash, or nothing at all.

For example, some traders may type “EUR/USD” as “EUR-USD” or just “EURUSD”. They all mean the same thang.

“Long” and “Short”

First, you should determine whether you want to buy or sell.

If you want to buy (which actually means buy the base currency and sell the quote currency), you want the base currency to rise in value and then you would sell it back at a higher price.

In trader talk, this is called “going long” or taking a “long position.” Just remember: long = buy.

If you want to sell (which actually means sell the base currency and buy the quote currency), you want the base currency to fall in value and then you would buy it back at a lower price.

This is called “going short” or taking a “short position”.

Just remember: short = sell.

Flat or Square

If you have no open position, then you are said to be “flat” or “square”.

Closing a position is also called “squaring up“.

The Bid, Ask and Spread

All forex quotes are quoted with two prices: the bid and ask.

In general, the bid is lower than the ask price.

What is “Bid”?

The bid is the price at which your broker is willing to buy the base currency in exchange for the quote currency.

This means the bid is the best available price at which you (the trader) can sell to the market.

If you want to sell something, the broker will buy it from you at the bid price.

What is “Ask”?

The ask is the price at which your broker will sell the base currency in exchange for the quote currency.

This means the ask price is the best available price at which you can buy from the market.

Another word for ask is the offer price.

If you want to buy something, the broker will sell (or offer) it to you at the ask price.

What is “Spread”?

The difference between the bid and the ask price is known as the SPREAD.

On the EUR/USD quote above, the bid price is 1.34568 and the ask price is 1.34588. Look at how this broker makes it so easy for you to trade away your money.

• If you want to sell EUR, you click “Sell” and you will sell euros at 1.34568.
• If you want to buy EUR, you click “Buy” and you will buy euros at 1.34588.

Here’s an illustration that puts together everything we’ve covered in this lesson:

Now let’s take a look at some examples.

Best Automated Forex Trading Software

The best-automated forex trading software allows you to trade using algorithms or bots. Expert Advisers with MetaTrader 4 or 5 are recommended by there are other good options. See which trading platforms we recommend.

Written by Justin Grossbard

Edited by Laura Wolfe

Fact Checked by Riley Adams

Edited by Laura Wolfe

Fact Checked by Riley Adams

Each month we update average spreads data published by the brokers the retail brokers lose %

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Best Automated Forex Trading Software

Here are some good forex trading platforms with automation tools

• OANDA — The Best Overall For Automated Trading
• FOREX.com — The Top Forex Broker For MetaTrader 4
• Trading.com — The Best Forex Broker For MetaTrader 5
• TD Ameritrade — Good Trading Features For Automation
• IG Markets — The Best Forex Broker For Technical Traders
• eToro — Great Broker For Copy Trading

Broker	Our Rating	Regulation	Standard EUR/USD Spread	Standard GBP/USD Spread	Standard AUD/USD Spread	Raw EUR/USD Spread	Raw GBP/USD Spread	Raw AUD/USD Spread	Commissions (USD Base)	MetaTrader 4	MetaTrader 5	cTrader	Execution Speed	Minimum Deposit	Currency Pairs	Crypto CFDs	Retail Leverage	Prof. Leverage
	81	NFA/CFTC	1.4	2	1.4	—	—	—				120ms	$0	68+ (Spot)	—	50:1	100:1
	61	NFA/CFTC FCA,CIRO	1.50	1.5	1.4	0.0	0.2	—	$7.00				30 ms (May 2023)	$100	80+ (Spot)	—	50:1
	43	ASIC, FCA CYSEC	—	—	—	—	—	—	—				120ms	$10	—	24 (Spot)
	41	SEC, NFA/CFTC FINRA	1.4	1.3	1.2	—	—	—	—				110ms	$2000	70+ (Spot)	—	50:1	50:1
	71	NFA/CFTC FCA, ASIC	1.2	1.9	1.4	—	—	—	$6.00				174ms	$450	80+ (Spot)	—	50:1	50:1

For those with the technical know-how, forex trading robots can take a manual trading strategy to the next level: increasing trade volumes and amplifying profits.

The best automation software can spot trading opportunities that no human would ever see, simply due to the sheer volume of data points a machine can review and analyze.

This page looks at the best-automated forex trading software for forex trading and the brokers that offer them.

1. OANDA — The Best Overall For Automated Trading

Forex Panel Score

EUR/USD = 1.4 GBP/USD = 2 AUD/USD = 1.4

MT4, TradingView, OANDA Trade (fx Trade)

Why We Recommend OANDA

We recommend OANDA as the best overall choice for American forex traders based on its range of trading platforms and selection of 68 currency pairs.

We particularly appreciate OANDA’s extensive MetaTrader 4 offering, which provides excellent support for automated trading with EAs and advanced charting. Or TradingView charts on OANDA Trade.

• Comprehensive data on asset fundamentals
• Expert Advisors on MT4
• Demo account with trading platform tutorials
• No minimum deposit

• Customer support is 24/5
• Inactivity fees
• Website could be better designed

OANDA has MetaTrader 4 (MT4) Expert Advisors for trading automation

OANDA is one of the largest brokers on our list due to its large international presence. The broker’s offering for clients in the US differs slightly due to regulatory requirements, but the extensive array of MetaTrader 4 add-ons and integrations pushes it to the top spot.

Key Strengths:

• Access to quotes on 70 currency pairs with no dealer intervention
• Multiple trading platforms (OANDA Trade for web and mobile, as well as MT4)
• Powerful technical analysis tools powered by Autochartist
• Integrated economic announcements with the OANDA Trade platform
• Third-party software (MotiveWave and Dow Jones Forex Select)
• Risk management orders and transparent pricing models

OANDA Trading Accounts and Products

If you’re in the US, OANDA offers a single, straightforward account type. While the broker does make use of a dealing desk, we found that the unique free structure and low commissions left plenty of opportunities for savings, provided you’re prudent. The Spread-Only account roughly parallels other brokers’ Standard Account offerings. Variable spreads start at 0.6 pips, and commission is included in round-turn trades for standard lots.

OANDA also offers an attractive rebate program that rewards high-volume traders. If you meet the minimum deposit requirements and exceed a monthly trade volume of US $10 million, you can choose between cash rebates and commission reductions ranging from US $5.00 and US $15.00 per million dollars traded.

If you already know you intend to narrow-focus your day-trading activity on forex, OANDA will likely meet your needs. The broker limits American traders to the currency markets, but offers a respectable selection of pairs: 10 majors and 58 minors, exotics and crosses. That includes EUR, GBP, USD, JPY, NZD, AUD and CHF – all the major base currencies. While we find that’s more than enough to support even sophisticated strategies, we can understand why traders looking for a more diversified portfolio might balk.

OANDA Automated Trading Platforms

Between its proprietary web and mobile trading platforms and comprehensive suite of MetaTrader 4 integrations and premium tools, OANDA stands out for its support for automated trading. We personally trialled basic and more advanced algorithmic trading strategies and found that OANDA’s platforms provided the tools we needed.

That said, the integrations in question worked smoothing and gave us exactly what we needed. Between MultiCharts, which connected to OANDA Trade via API, and AutoChartist, for example, we had access to more tools and indicators than with other brokers.

Our OANDA Final Verdict

OANDA’s tight spreads, advanced technical analysis tools and extensive selection of trading instruments make it an excellent choice for US forex traders, regardless of experience level.

OANDA offers new Welcome Bonus of up to $10,000

OANDA is now offering a Welcome Bonus of up to $10,000 for all new account holders, a unique incentive to help boost your trading account. To opt into this offer you simply need to:

• Complete an online form on OANDA’s website
• Open an account and deposit at least $300 and maintain this for at least 60 days
• Meet OANDA’s minimum trade volume requirements of $25,000
• Do all the above by 30 April 2024 and receive $100

• Complete an online form on OANDA’s website
• Open an account and deposit at least $50,000 and maintain this for at least 60 days
• Meet OANDA’s minimum trade volume requirements of $50,000,000
• Do all the above by 30 April 2024 and receive $10,000

*OANDA’s Welcome Bonus of $10,000 is now available for all new account holders.

2. FOREX.com — The Top Forex Broker For MetaTrader 4

Forex Panel Score

EUR/USD = 0.8 GBP/USD = 0.8 AUD/USD = 1.7

MT4, MT5, FOREX.com Trading Platform

Why We Recommend FOREX.com

We recommend FOREX.com for its excellent MetaTrader 4 platform options, which include advanced trading tools and charting abilities suitable for even experienced traders. If you intend to pursue automated trading for forex, this broker offers nine proprietary EAs, including Sentiment Trader.

The broker’s proprietary REST API allows you to connect your algorithmic strategy to 80 forex markets for deep liquidity access.

• Top interactive resources and trading ideas
• 80 currency pairs
• RAW Spread account available

• Required minimum deposit of US $100
• Inactivity fee
• Customer support response time could be faster

FOREX.com MT4 EAs allow for algo trading

FOREX.com is one of the largest brokers on this list due to its large international presence. While the offering for US account holders differs slightly due to regulatory requirements, it remains an excellent option for its low trading costs and powerful collection of trading tools.

Key Strengths:

• Sophisticated technical trading tools
• Great variety of currency pairs
• Fast trade execution

FOREX.com Trading Accounts and Products

If you’re a beginning retail investor, the Standard and MetaTrader 4 accounts charge no commission or funding costs and a minimum spread of 1.2 pips. The main difference? Your trading platform. Standard account holders will execute trades via FOREX.com’s proprietary platform, while MT4 account users will, predictably, trade via the MetaTrader 4 trading platform.

If you’re a system trader or rely heavily on volume and speed to generate gains, you may prefer the RAW Spread Account. This account has variable spreads that start from 0.0 pips and a commission of $14.00 round-turn ($7.00 side ways) for each 100k lot you trade.

With over 80 currency pairs, plus unleveraged gold and silver, FOREX.com stands out among US forex brokers for the range of asset classes available to US-based forex traders.

FOREX.com Automated Trading Platforms

Of all the brokers we reviewed, FOREX.com offers the most comprehensive range of trading tools and platforms to support your automated trading system.

If you prefer the classics, FOREX.com has a dedicated account type just for MetaTrader 4. In addition to advanced charting, hundreds of technical indicators and drawing tools, MetaTrader 4 allows forex traders to automate trading strategies using their own or third-party EAs.

MetaEditor, the internal code editor included in the MetaTrader 4 trading terminal, empowers you to develop and test your own Expert Advisors with custom technical indicators and scripts using the MQL4 programming language. Even better: because developer MetaQuotes has released the source code for MetaTrader 4, high-quality, professionally designed integrations apps and robots to facilitate automated trading abound. MetaTrader 4 also helps you safeguard your investment and outsource risk management with integrations designed to automatically hedge positions.

For those who prefer the look and feel of MetaTrader 4 but require access to the more powerful technical indicators and analytics of its younger sibling, MetaTrader 4’s Python package allows for integration with MetaTrader5.

Not convinced MetaTrader 4 is right for you? FOREX.com has other options available. The broker’s proprietary REST API enables traders to connect an algorithmic trading strategy to over 80 forex markets, giving traders access to deep liquidity, as well as advanced order types and live-streaming prices.

FOREX.com also offers brokerage account holders the option to trade via NinjaTrader 8, which supports automated trading and EAs. The platform boasts access to thousands of third-party technical indicators to assist in developing trading apps, advanced charts, chart drawing tools and social trading services. Professional developers well-versed in C# can write and sell automation on an open market, while less advanced forex traders can take advantage of NinjaTrader’s “point and click” construction system to build, backtest and implement automation and indicators.

Finally, FOREX.com account holders have access to automated market analysis via Trading Central, FOREX.com’s proprietary expert advisor tool and advanced charts powered by Trading View.

In terms of trading tools, beginners developing the trading strategy to drive an EA will appreciate FOREX.com’s charting tools, particularly the ability to customize virtually every aspect of a chart – from indicators to colors to size – ensures maximum clarity and legibility for even novices trading on a demo account.

Suitable even for professional traders, FOREX.com’s advanced charting features an extensive array of chart types, timeframes and technical indicators and drawing tools. Users have the option to save preferred chart types and variables for future use, as well as compare multiple financial markets with overlays. As a leader in online trading for almost two decades, FOREX.com has developed some of the most powerful, flexible analytical tools available.

FOREX.com also allows brokerage account holders to purchase VPS hosting for an additional fee.

FOREX.com: Our Verdict

An easy-to-navigate trading environment, low trading costs and numerous trading platforms from which to choose make FOREX.com a good choice for intermediate and advanced traders hoping to control costs without sacrificing a quality trading experience.

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