It's usually only includes the currencies, and those are usually EUR/USD, GBP/USD, USD/JPY (Majors), Minors and Exotics. Now, if you are also talking about trading Gold (XAUUSD), Oil, Indices, and even Stock derivatives, these are not Forex, it's called - CFD trading. It's when you buy an asset without actually owning it, and it gives you an edge in the market. What I mean by that is owning the asset comes with a bag full of headache, because let's suppose you want to buy Oil, where would you even store it? I know it's a simple and perhaps an absurd example, but what I was going to say is that CFD is a nice solution to most of trading problems, you can just trade the price of an asset without actually owning it. So why is CFD trading better except for saving us some headaches? Leverage, that is why, it increases risk, but also increases your buying power up to 1000 times. To manage the risks, most brokers have dynamic leverage which automatically adjusts it depending on your trading volume, and if you open a trade with more lots, you get less leverage, and vice versa. Smaller accounts might get up to x1000 leverage, and it's the advantage of trading CFD assets.
This brings us back to your question, is it expensive to trade? No, it's not expensive to trade, but people can make it expensive for themselves. What I mean is that sometimes people just put $100 and open a trade with maximum leverage for full margin, and then they get angry when they experience only losses, it's just they didn't follow any risk management approaches, and the results are more than fair. If they keep investing and trading without any plan and with unjustitied risks, they can make it expensive for themselves. If you are asking about some specific numbers, then I'd say that different brokers have different minimum deposits, and sometimes, brokers offer varios accounts that require higher min deposits for better conditions.
To answer your question better and in detail, I want to take Primexbt broker as an example and calculate some trading costs, so you can decide if it's expensive or not. So the minimum deposit starts from just $10, and I say "starts" because different payment methods may have different min deposits, but the lowest is $10 and it should be with Perfect Money, if I am not mistaken. Other methods may have higher requirements, and you can see all the details in there. Is that expensive? I think no, trading is more than accessible for most, but I won't call it trading in this scenario. What I mean is that with just $10, you won't have much profit. Remember cases where traders make it expensive for themselves by blowing one account after the other? It's becasue they don't have proper risk management, and you are adviced to risk like 1% of your balance, so it's 10 cents, and if you win 1:1 trade, you get 10 cents profit, and even with a handsome winrate, in a month, you are not looking at any noticeable profit. This is why it makes sense to invest more and follow a careful plan that can earn you some money and don't put you at too much risk, and if I was to put a minimum deposit that gives you enough flexibility, I'd say at least $100, and the more the better.
There's actually a reason why I picked primexbt. Empowering traders to trade better and pay less for it is one of their core priorities, and it makes sense to trade with better conditions. However, if I am being totally honest, they have limited amount of CFDs to trade, but it's still enough because the most popular pairs are there. Forex majors, gold and silver get up to x1000 leverage here, and oil (brent and crude) get up to x200 with a smaller deposit, so even with a smaller deposit, you might get profit opportunities. The spreads here are well below market average, you can compare them to leading market brokers and you will be surprised by the quality of trading conditions here, regarding CFDs.
Still, the main reason primexbt is mentioned here is beacause of crypto futures trading, and it's another type of assets. If you like crypto but don't like the usual conditions which have exteremely wide spreads and low leverage, then you might be interested in futures. You can get access to interesting instruments as BTC/USDT, ETH/USDT, SOL/USDT and people like them because quality is high, and fees are low. By the way, leverage gets up to x150 here, which is a lot for crypto. For comparison: many EU countries have set max. leverage for crypto as 1:2. Still, the biggest advantage of crypto futures is fees, and those are low, maker fee is always 0.01% and taker fee starts from 0.045%. The difference in these fees is pretty simple, when you open a pending order - you add liquidity to the market and that's when you pay maker fees. When you open a trade immediately, you "take" liquidity from the market, and will be a subject to taker fees, which can get as low as 0.015% with enough volume.
Cost of trading is one of the factors that can make it expensive, because you pay for trading services in some forms. For CFDs, you might pay spread and comissions, and for futures, you pay maker and taker fees, and if those are low, your trading becomes more affordable overall. The conclusion we can do here simple, trading is not expensive, but you must do some things to ensure that. First would be to choose a decent broker that has better trading condition than others, like lower costs. Second is you need a strategy to trade well, and that is obtained by time and practice, so starting with a demo account is always the reasonable thing to do, and once you show good results there, you can move on to live trading.
Keep in mind that information here is not financial advice. Always make your own research before investing.
for your macro trade framework - On the part around rates differentials, for your CAD/USD example where youre buying USD Shorting CAD, how would you look at the forward curve? since your thesis was that CA was on a rate cut path, would the forward curve effectively show CAD higher over the term structure per Covered Interest Rate Parity and you are just aiming to profit off the fact that the market is mispricing the premium in CAD and same for dollar where the forward would say that USD is at a discount but obviously the rates path was higher/sticky? This post is amazing thank you!
Thank you lord fed for the explanation, do you have any book that goes into the details of what drives fx market longterm and short term(daily/weekly basis) for trading?
Thanks Fed. Yes pls if there’s more about it- how to use it as a gauge basically & more mechanics of how it works. I did do some google searches & learnt quite a bit but if there’s a great guide like your primer which has all in one place it will be great. I would XCCY basis must be going crazy right now given the market
Love learning how the professional/institutional arena trades and then having it explained in a way for retail to understand. Which you did beautifully.
- Major Currencies (Highways and Cities): Major currencies like the USD, EUR, JPY, and GBP are akin to highways connecting major cities. These currencies are widely traded, highly liquid, and the backbone of global trade and finance. As highways facilitate efficient and large-scale transportation between key hubs, major currencies provide stability and reliability in international markets.
- Minor Currencies (Secondary Roads and Towns): Minor or regional currencies like the NZD or SEK are like well-maintained secondary roads connecting smaller towns. They are still crucial for trade within specific regions but lack major currencies' global reach and liquidity.
Exotic Currencies (Village Roads): Exotic currencies like the Iranian rial or Zimbabwean dollar resemble local village roads—narrow, less traveled, and often unreliable. They are less liquid, more volatile, and typically used only within their domestic economies or for niche purposes.
- Currency Strength Indicators (Traffic Flow): Just as traffic flow on highways and roads indicates their usability and importance, currency strength indicators reflect the economic activity and market confidence in a currency. A "jammed highway" might represent a strong currency under stress (e.g., high demand), while an empty village road could signify a weak or underutilized currency.
It's usually only includes the currencies, and those are usually EUR/USD, GBP/USD, USD/JPY (Majors), Minors and Exotics. Now, if you are also talking about trading Gold (XAUUSD), Oil, Indices, and even Stock derivatives, these are not Forex, it's called - CFD trading. It's when you buy an asset without actually owning it, and it gives you an edge in the market. What I mean by that is owning the asset comes with a bag full of headache, because let's suppose you want to buy Oil, where would you even store it? I know it's a simple and perhaps an absurd example, but what I was going to say is that CFD is a nice solution to most of trading problems, you can just trade the price of an asset without actually owning it. So why is CFD trading better except for saving us some headaches? Leverage, that is why, it increases risk, but also increases your buying power up to 1000 times. To manage the risks, most brokers have dynamic leverage which automatically adjusts it depending on your trading volume, and if you open a trade with more lots, you get less leverage, and vice versa. Smaller accounts might get up to x1000 leverage, and it's the advantage of trading CFD assets.
This brings us back to your question, is it expensive to trade? No, it's not expensive to trade, but people can make it expensive for themselves. What I mean is that sometimes people just put $100 and open a trade with maximum leverage for full margin, and then they get angry when they experience only losses, it's just they didn't follow any risk management approaches, and the results are more than fair. If they keep investing and trading without any plan and with unjustitied risks, they can make it expensive for themselves. If you are asking about some specific numbers, then I'd say that different brokers have different minimum deposits, and sometimes, brokers offer varios accounts that require higher min deposits for better conditions.
To answer your question better and in detail, I want to take Primexbt broker as an example and calculate some trading costs, so you can decide if it's expensive or not. So the minimum deposit starts from just $10, and I say "starts" because different payment methods may have different min deposits, but the lowest is $10 and it should be with Perfect Money, if I am not mistaken. Other methods may have higher requirements, and you can see all the details in there. Is that expensive? I think no, trading is more than accessible for most, but I won't call it trading in this scenario. What I mean is that with just $10, you won't have much profit. Remember cases where traders make it expensive for themselves by blowing one account after the other? It's becasue they don't have proper risk management, and you are adviced to risk like 1% of your balance, so it's 10 cents, and if you win 1:1 trade, you get 10 cents profit, and even with a handsome winrate, in a month, you are not looking at any noticeable profit. This is why it makes sense to invest more and follow a careful plan that can earn you some money and don't put you at too much risk, and if I was to put a minimum deposit that gives you enough flexibility, I'd say at least $100, and the more the better.
There's actually a reason why I picked primexbt. Empowering traders to trade better and pay less for it is one of their core priorities, and it makes sense to trade with better conditions. However, if I am being totally honest, they have limited amount of CFDs to trade, but it's still enough because the most popular pairs are there. Forex majors, gold and silver get up to x1000 leverage here, and oil (brent and crude) get up to x200 with a smaller deposit, so even with a smaller deposit, you might get profit opportunities. The spreads here are well below market average, you can compare them to leading market brokers and you will be surprised by the quality of trading conditions here, regarding CFDs.
Still, the main reason primexbt is mentioned here is beacause of crypto futures trading, and it's another type of assets. If you like crypto but don't like the usual conditions which have exteremely wide spreads and low leverage, then you might be interested in futures. You can get access to interesting instruments as BTC/USDT, ETH/USDT, SOL/USDT and people like them because quality is high, and fees are low. By the way, leverage gets up to x150 here, which is a lot for crypto. For comparison: many EU countries have set max. leverage for crypto as 1:2. Still, the biggest advantage of crypto futures is fees, and those are low, maker fee is always 0.01% and taker fee starts from 0.045%. The difference in these fees is pretty simple, when you open a pending order - you add liquidity to the market and that's when you pay maker fees. When you open a trade immediately, you "take" liquidity from the market, and will be a subject to taker fees, which can get as low as 0.015% with enough volume.
Cost of trading is one of the factors that can make it expensive, because you pay for trading services in some forms. For CFDs, you might pay spread and comissions, and for futures, you pay maker and taker fees, and if those are low, your trading becomes more affordable overall. The conclusion we can do here simple, trading is not expensive, but you must do some things to ensure that. First would be to choose a decent broker that has better trading condition than others, like lower costs. Second is you need a strategy to trade well, and that is obtained by time and practice, so starting with a demo account is always the reasonable thing to do, and once you show good results there, you can move on to live trading.
Keep in mind that information here is not financial advice. Always make your own research before investing.
Thanks for making these articles available.
for your macro trade framework - On the part around rates differentials, for your CAD/USD example where youre buying USD Shorting CAD, how would you look at the forward curve? since your thesis was that CA was on a rate cut path, would the forward curve effectively show CAD higher over the term structure per Covered Interest Rate Parity and you are just aiming to profit off the fact that the market is mispricing the premium in CAD and same for dollar where the forward would say that USD is at a discount but obviously the rates path was higher/sticky? This post is amazing thank you!
Thank you lord fed for the explanation, do you have any book that goes into the details of what drives fx market longterm and short term(daily/weekly basis) for trading?
Great post. Just want to add that tom next in EM market(like CNH) sometimes can be very interesting due to CB intervention.
Great read. Took me like 90 mins to read. Is there any good resource for Cross Currency basis? Would like to learn more about that.
Ha, it's a long one. I am more than happy to answer questions via DM or comment - can DM me on Twitter if preferable.
I will try and find something worthwhile for you.
Thanks Fed. Yes pls if there’s more about it- how to use it as a gauge basically & more mechanics of how it works. I did do some google searches & learnt quite a bit but if there’s a great guide like your primer which has all in one place it will be great. I would XCCY basis must be going crazy right now given the market
Fab read
Many thanks sir!
Very well written for someone who knows little about this! Thank you sir
I’m glad you enjoyed.
How long did it take out of interest ?
To read the whole thing?
Love learning how the professional/institutional arena trades and then having it explained in a way for retail to understand. Which you did beautifully.
Yes
Read it in chunks since I was working but about 1.5 hr
Great introduction, for sure, even to old-timers like me who’s run an FX business !
Extremely generous of you to leave it outside of the paywall !
Appreciate that, Chico.
Truth is, I didn’t have a grand plan when I published it. FX is so often overlooked or misunderstood, so there’s that.
Glad it resonated with both new traders and people like you who’ve been around the block!
Loved the detailed explanations, the synthesis and the final framework. It took a while to read but it was definitely worth it.
I’m glad you enjoyed!
Great post. I think of currencies like this:
- Major Currencies (Highways and Cities): Major currencies like the USD, EUR, JPY, and GBP are akin to highways connecting major cities. These currencies are widely traded, highly liquid, and the backbone of global trade and finance. As highways facilitate efficient and large-scale transportation between key hubs, major currencies provide stability and reliability in international markets.
- Minor Currencies (Secondary Roads and Towns): Minor or regional currencies like the NZD or SEK are like well-maintained secondary roads connecting smaller towns. They are still crucial for trade within specific regions but lack major currencies' global reach and liquidity.
Exotic Currencies (Village Roads): Exotic currencies like the Iranian rial or Zimbabwean dollar resemble local village roads—narrow, less traveled, and often unreliable. They are less liquid, more volatile, and typically used only within their domestic economies or for niche purposes.
- Currency Strength Indicators (Traffic Flow): Just as traffic flow on highways and roads indicates their usability and importance, currency strength indicators reflect the economic activity and market confidence in a currency. A "jammed highway" might represent a strong currency under stress (e.g., high demand), while an empty village road could signify a weak or underutilized currency.
Your guide is like Waze!