Forex Trading in Canada

In recent years, more people have shown interest in the foreign exchange market, including Canadians. Often, the foreign exchange market is referred to as simply forex. However, Canadians should keep in mind that although legal, forex trading in Canada is highly regulated. The reason for the government regulation isn’t far-fetched. Prices in the forex markets aren’t always static, making it difficult for traders to speculate on a currency’s future price. Regardless of the inherent risk, forex trading is a rewarding endeavor. If you’re looking to start your trading journey soon, this article explains everything about forex exchange trading in Canada.

What is forex trading in Canada?

Foreign exchange trading in Canada has no special meaning compared to other countries. So what is Forex trading in Canada? Foreign Exchange Trading, or Forex or FX trading for short, describes the exchange of currencies. For example, when you exchange CAD for Japanese ¥, you’re participating in forex trading. The forex market is the largest and most liquid financial market. Due to its high liquidity, the buying and selling of currencies occur within milliseconds. 

The market is decentralized, having no single controlling entity. However, certain third party, objective entities facilitate the daily exchange of currencies in the market, known as intermediaries. The FX market operates 24 hours a day, 5 days a week. This is because the time zones of the four primary financial centers overlap. These metropolitan centers include:

• Sydney
• Tokyo
• London
• New York City

Before one center closes for the day, another center has already opened and begun trading activities. For this reason, the forex market runs 24 hours a day, round the clock, from Monday to Friday.

Also, it’s important to know that forex trading is done in pairs. When you buy a listed currency in a pair, you are selling the other listed currency simultaneously. More specifically, a forex pair is a combination of two currencies, where the first one is the “base” and the other is the “quote”. For instance, the British pound versus the U.S. dollar (GBP/USD). The GBP is the base currency, while the USD is the quote. However, the pairing can be done with any two currencies that are being exchanged in the market.

Related Reading: What are options?

Is forex trading legal in Canada?

Yes, forex trading is legal in Canada. But it’s recommended that you choose a licensed and trusted broker. Ideally, a broker that is licensed by the Canadian Investment Regulatory Organization (CIRO). The CIRO, Canadian Security Administrators (CSA), and various security commissions are regulatory bodies. They regulate FX trading in Canada. 

CIRO is a new regulatory body that carries on the duties of IIROC and operates at the national level. While the CSA, and various other security commissions, oversee financial regulation by province and territory. Each region in Canada has one provincial regulatory body. The CIRO oversees security dealers, brokers, and trading activity in Canada, ensuring that your money is safe. Make sure a regulatory body has authorized your choice of broker. Also, it’s worth noting that certain brokers may be regulated provincially but not at the national level.

Here is a list of top-ranking brokers that are licensed by CIRO:

• CMC Markets
• FOREX.com 
• AvaTrade

Is forex trading legal in Canada for international students? 

Yes, international students can participate in forex trading in Canada. But you are subject to specific rules and regulations, plus certain tax implications. Sometimes, these rules might be unfavorable and hinder you from trading. 

Keep in mind that participating in FX trading in Canada, and everywhere else, is highly risky. It requires careful study and discipline, particularly as an international student. Also, know your financial status and investment goals before embarking on your forex journey.

Related Reading: What are futures?

How to Start Forex Trading in Canada

As a beginner who desires to venture into forex exchange trading in Canada, the following steps will get you started on the journey:

1. Understanding the Forex Market

Most people begin their trading endeavors on the wrong foot. With a get-rich-quick mindset, they enter the market aggressively and began placing trades from day one. Sadly, the end is always disastrous and filled with regret. Remember, the forex market is highly volatile and sporadic — it takes time to learn the ins and outs of the system. It takes even longer to understand how to use the system for profit.

Understanding the forex market involves knowing the market’s price fluctuations and what triggers them. Factors you may want to look out for are:

• Global news
• Political news, and
• Economic indicators

2. Educate Yourself on the Basics of FX Trading in Canada

We obviously can’t ignore knowledge if profitability is the goal. Educate yourself on the basics of forex trading in Canada. Learn about technical and fundamental analysis, currency pairs, trading strategies, and risk management. Also, it’s good to have an understanding of indicators, charting, and candlestick patterns.

3. Choose a Broker and Create a Trading Account

This stage is where you choose your preferred broker. Make sure to choose a broker that a recognized Canadian regulatory body has authorized. After that, move on to signing up and creating a forex trading account with the broker. Provide important documentation, like proof of address and identification, to verify your identity. Lastly, you must carefully read through and comprehend the broker’s terms and conditions before proceeding.

4. Fund Your Account

It’s unwise to fund your account at an early stage as a beginner. Instead, many forex brokers offer demo accounts that allow you to practice trading with virtual money and market conditions. As time goes on and as you grow in confidence and experience in forex trading in Canada, you proceed to fund your account and experience real life conditions.

Funding is done via various payment methods, such as bank transfers, e-wallets, and credit/debit cards. Determine the amount you want to start with and the preferred payment method you’re comfortable with.

5. Develop a Forex Trading Strategy and Practice

This involves having a solid strategy and staying disciplined to be a successful forex trader in Canada. When creating a strategy, you must include your trading goal, money management rules, and risk management. 

Also, at this point, you should have selected a preferred trading platform for your analysis and practice. Two platforms are widely known for forex exchange trading in Canada; they include:

• MetaTrader, and
• Trading View

6. Stay Updated on Market News

Price fluctuations in the forex market are affected by various fundamental factors. They include political events, economic data releases, and central bank statements. Staying up-to-date with news and events can help you make informed decisions and avoid surprising price movements.

7. Monitor and Evaluate Your Trades

As you place trades, it’s advisable to keep a close eye on them and monitor the forex market regularly. Consider keeping a trading journal to track your progress and make improvements to your strategy, if necessary.

Overall, learn from unsuccessful traders and seek trading advice from successful forex traders. Do not approach the market with a desperate-to-get-rich-quick and greedy attitude; it won’t end in your favor!

Related Reading: Canadian Investment Accounts

Best Forex Trading Platform in Canada

What is a Forex trading platform? It’s a forex trading software application that has embedded features and tools. These features and tools allow traders to analyze and place trades, manage risks, and more from their home computer.

The best forex trading platforms in Canada include:

• MetaTrader 4 and MetaTrader 5: MetaTrader (a.k.a. MT4 and MT5) is the overall best-known platform for trading currencies in Canada and other countries. Over 85% of traders utilize MT4. It has a user-friendly interface that traders can interact with. It also offers a one-click trading feature.
• Trading View: TradingView is an excellent platform for performing technical analysis. Also, Trading View’s community helps traders discover forex opportunities.
• cTrader: cTrader is a competing platform for forex traders. MetaTrader and CTrader are two platforms that share certain similar features. They both offer automated trading, advanced charts, one-click trading, and more. It’s a beginner-friendly platform.
• Pro RealTime: Another trading platform, though inferior to MetaTrader, is the Pro RealTime platform. Unlike MetaTrader, Pro RealTime offers neither one-click trading nor trading alerts.

How to Open a Forex Trading Account in Canada

Opening a forex trading account in Canada is easy. However, before we dive into the procedures, let’s outline the best-regulated forex brokers in Canada with a good reputation. They include:

• CMC Markets
• FOREX.com
• AvaTrade
• Interactive Broker

Now, how do you open a Forex account in Canada? Follow these steps;

• Research and choose a reputable and regulated broker.
• Visit the broker’s online platform and click on Sign Up or Open Account.
• Provide the required personal information and necessary documents.
• Choose the account type (e.g., micro, mini, or standard) and your base currency (e.g., CAD).
• Carefully read and accept the broker’s terms and conditions.
• Fund your account via one of the listed payment methods.
• Submit the required documents to verify your identity.
• After verification and approval, download and install the trading platform your broker provides.
• Log in to your trading account on the trading platform using credentials provided by your broker.
• Now that your account is all set, start trading by analyzing the market and implementing your trading strategy.

Can I trade forex for $100?

Yes, you can trade forex for $100. But you must carefully develop a profitable trading plan and manage your risks to avoid a huge drawdown in equity. It’s advisable to begin with a demo account as a beginner before trading with a real account. Trading with a $100 account also defines your position size. Specifically, the best lot size for a $100 to $500 account is the Micro lot. A micro-lot is equivalent to 1000 units, which is about $0.10 per pip movement.

What is the average salary of a forex trader in Canada?

The salary of a forex trader in Canada varies. It varies depending on certain factors, such as the trader’s skills, the size of the trading account, and market conditions. However, according to indeed.com, the average salary of Forex traders in Canada is $40,970 per annum. This average result is generated from a report on the salaries of 55 forex traders.

Another study was also conducted on 43 salaries, and the average turned out to be $100,000 per year or 51.28 per hour. In essence, getting an exact salary for forex traders is difficult, as certain traders are more profitable than others in Canada. Ultimately it boils down to skill, input and your ability to learn the market.

Do forex traders pay tax in Canada?

Yes, forex traders pay tax in Canada. Trading forex in Canada is not tax-free. Every profit made must be reported as capital gains, self employment income, or investment income. Likewise, you can also report losses on your tax return to offset your capital gain and reduce your potential tax liability.

Can forex trading be profitable?

Yes, forex trading can be profitable, but at the same time, you can incur a series of losses. It’s worth noting that even professional forex traders who are profitable still lose trades but at a minimal rate.

Overall, profitability in the forex market depends on your expertise, skills, and knowledge. You must stay disciplined in applying your risk management rules. More importantly, eliminate greed and fear entirely from your forex journey, especially when making trade decisions.