Canadian forex trading is regulated by the Canadian Securities Administrators (CSA). Brokers regulated by the CSA are the best choice for online trading. The Canadian dollar is referred to as a commodity currency. The value of the Canadian dollar is closely related to the value of its exported commodities. Canada is a significant exporter of oil, aluminum, and other precious metals.
Selecting a registered forex broker should be the first consideration. The CSA protects investors from fraudulent and unfair practices and offers a comprehensive website to assist investors interested in Canadian forex trading. A reliable forex broker should provide educational resources as well as forex software and reasonable commission rates. The Canadian Investor Protection Fund (CIPF) provides insurance for Canadian investment accounts.
Several forex platforms are available for Canadian forex trading. Most retail brokers make money from the spread, which is the difference between the bid and ask prices of the quoted pair. Electronic Communications Networks (ECN) provide clients direct access to other forex participants. ECNs offer tighter spreads but charge a fixed commission per trade.
Canadian forex trading might involve trading the Canadian dollar against another currency. The foreign exchange market is what determines the values of international currencies. The trader might elect to trade a variety of currency pairs, which might or might not include the Canadian dollar. The primary purpose of the currency market is to assist in foreign trade and investment. Speculation in exchange rates has become a popular investment tool.
Canadian dollar traders generally consider the value of exported Canadian commodities. As the price of oil rises, the currency usually increases in value. This type of commodity correlation can serve as a valuable trading tool. Many other political and economic factors must also be considered before trading. Canadian forex trading can be successful if due diligence is paid to fundamental and technical analysis of the currency markets.
Fundamental analysis is the study of economic conditions within each country. Economic indicators generally come in the form of reports and policies. These reports are announced periodically. One of the major factors in currency value is interest rates. Other reports to consider are gross domestic product, retail sales and employment statistics.
These reports can indicate whether a nation’s economy is advancing or declining. Many reports are scheduled on a monthly basis. The investor should pay particular attention to reports concerning the forex pairs to be traded. Fundamental analysis should be used in conjunction with technical analysis.
Technical analysis, or chart reading, is a popular method of currency forecasting. Technical studies might include chart patterns, support and resistance and many technical indicators. Proponents of technical analysis believe that all pertinent information can be viewed on the price chart. By combining this type of analysis with fundamental studies, the investor might be able to obtain an edge in forecasting future price.
Canadian forex trading is much the same as other international currency trading. The main difference is in broker selection. Canadian forex brokers should be regulated by the CSA. All participants in currency trading should be familiar with the risk involved.