As one of the world’s largest, most active markets and with a market trade of $750 billion, trading in foreign exchange (forex or FX) is a popular venture due to its high liquidity and constant availability for investors.
Interest in forex trading has been continuously gaining popularity in the last 5 years, with trading volumes peaking by 300% in 2020. In light of this exceptional year, there remains significant global interest in forex trading, with search volume for “how to trade forex” increasing by 127% between February and April 2023.
Seeking to uncover the best countries to be a forex trader, City Index created a points-based index system evaluating the net gross turnover of forex instruments, the cost of living (by analysing metrics such as local purchasing power), broadband internet speeds and forex trading hours in 50 countries to determine the best countries in the world for forex trading.
UK leading in FX trading volume and pip movements
The United Kingdom places eighth in the index, however, the country scores highly for its net-gross turnover of OTC foreign exchange instruments – which was the highest worldwide in 2022 at $3,755 billion. This is 98% higher than in nearby France, where turnover was just $214 billion in the same period. Not only this, but the UK has the most pip movement of the four major markets (Sydney, Tokyo and New York) when looking at currency pairs.
Fawad Razaqzada, forex trading expert from City Index said, “Different pairs will be better to trade at different times of the day. This is because the time of day heavily influences how liquid a market is, and how much price movement it’s likely to see.
“By looking at the average pip movement of major currency pairs during each forex trading session, we can see that the London session – which runs from 08:00 to 16:00 GMT – has the most movement.
As a general rule, a currency pair will see the most liquidity and price action when two sessions overlap. For example, if you’re trading EUR/JPY, you’d want to trade when both the New York and Sydney session are open – which is between 8:00 to 9:00(GMT).”
Singapore leads in several metrics for forex traders
Amid reports that Singapore retained its position as the third largest FX centre in the world according to daily trading volumes (4), after the UK and the US, City Index can reveal that Singapore is the most suitable country for forex traders.
Singapore has an overall forex suitability score of 8.07/10, largely due to the country’s high turnover of OTC foreign exchange instruments ($929 billion), which is six times higher than China ($153 billion).
Not only this, but Singapore has the fastest average broadband speed of all countries analysed (233.455 Mbps), which is 131% faster than in neighbouring Malaysia (100.84 Mbps) — making it the perfect location for online trading.
Based on the assumption that most forex traders will trade between 08:00-18:00 local time, Singapore ranks highly for the number of hours of time overlap with Tokyo and Sydney, despite having little overlap with London which has the highest market activity and the most pip movement.
Fawad Razaqzada, forex trading expert from City Index, comments on why fast broadband speeds are key for traders, “In the fast-paced forex market, even a few seconds can make a significant difference in trade outcomes, so a reliable and speedy internet connection is crucial.
“Fast broadband is key for forex traders as it allows for faster trade execution, minimises the risk of connection drops or disruptions and allows for multi-platform trading across several devices.”
China outranks Japan and Hong Kong for forex trading suitability
China is in second place with a forex suitability score of 7.97/10, despite being outranked by Japan ($43b) and Hong Kong ($694b) in the turnover of OTC foreign exchange instruments.
China ($153b) benefits from a high market overlap score of 9.02/10 for how its time zone aligns with four key markets. In addition, the country has a fast average broadband speed of 156 Mbps which is over double the average speed in Vietnam (74.39 Mbps).
Additionally, China benefits from a low cost of living (83), which ranks 47 places higher than Vietnam (35.7). A low cost of living can be attractive to forex traders as it may indicate a healthy or growing economy which can provide more opportunities to generate returns, as well as greater disposable income allowing investors to increase their trading capital.
Japan has the fourth-highest turnover of foreign exchange instruments
Despite having a 183% higher ($433 billion) net-gross turnover of OTC foreign exchange instruments than China ($153 billion), Japan ranks third in the index with a forex suitability score of 7.64/10.
This is partly due to Japan’s lower cost of living (29) which is ranked 22 places higher than Singapore for living affordability. Not only this, but Japan has a high market overlap score (8.63/10), based on the number of hours of time overlap with the Tokyo and Syndey markets — as well as a moderate average broadband speed (157.71 Mbps), which is 68% faster than the United Kingdom (93.52).