How to Start Forex Trading in the Czech Republic

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Contributor, Benzinga
June 29, 2023

Trade forex in the Czech Republic with eToro as your trusted online forex broker.

Currency investors have never had an easier time signing up for a brokerage account online in the Czech Republic, also referred to as Czechia. As Czechia completes its process of adopting the euro as its base currency and the central bank, Czech National Bank works together with EU authorities to prevent currency fraud, you might want to get involved in retail forex trading.

Have you ever been interested in learning more about how currency trading works? Our guide to the ins and outs of foreign exchange trading in Czechia will help you get started.

Disclosure: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Get Started with Forex in Czechia

Before you can begin trading forex, you’ll need to connect to the internet and open a brokerage account. Be sure that your internet connection is safe, private and secure before you proceed.

When you 1st begin to compare forex brokers, you’ll notice that there are both local and international options. Some of the factors that you might want to consider when you think about which broker is right for you can include:

  • Available base currencies
  • Account management and trading fees
  • Supported platforms and transfer methods
  • Currencies available to trade
  • Current licensure status and supported jurisdictions

Once you find a FX broker that you’re interested in working with, open an account online. You’ll typically need to submit a bit of personal information before you can fully access all of your account’s trading capabilities. You might also need to download a third-party platform (like MetaTrader 4) before you can trade.

After your account is fully operational, deposit your trading funds. Most brokers support a variety of transfer methods, including:

  • Direct bank transfers
  • Transfers from electronic wallet services
  • Transfers from a credit or debit card

It might take a few days for your deposit to clear into your account. As soon as your funds arrive, you can officially place your first forex trade. 

Czech Republic Forex Trading Strategies

Most traders use one or both of the common FX market analysis methods of fundamental and technical analysis in their trading strategy. Because traders in Czechia enjoy a stable economy and a well-regulated market, both forms of analysis are suitable when using the koruna as your base currency. However, the best trading strategy for you might vary depending on your unique personality and preferences.

Technical Analysis 

Technical analysis is a form of foreign exchange market analysis that looks at past exchange rate movements, data and charting patterns to determine how a currency pair will change in value. Most traders who use technical analysis take a short-term approach to trading and trade the same currencies pairs every day.

To effectively use technical analysis to trade, you’ll need to interpret charting patterns, volume changes and candlestick formations to determine how a currency is likely to move. There are also many more technical analysis strategies you can use to trade effectively. 

Some traders who use technical analysis memorize a vast range of chart patterns, while others look for the same patterns each time they trade. In some cases, a trader using technical analysis might even use automatic trading software to execute multiple trades in as little as a few seconds based on predefined buy and sell signals. 

Fundamental Analysis

Fundamental analysis is a type of currency valuation that involves researching the underlying factors that influence a country’s economic strength. Traders who use a fundamental analysis-based strategy know that a strong economy means that a country’s underlying currency will probably increase in value. Some of the primary sources of information these traders may examine include:

  • GDP reports
  • Central bank benchmark interest rates
  • Inflation rates
  • Consumer confidence indexes
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Traders who use fundamental analysis to trade often research the economic conditions of the countries whose currencies they take positions in.

Traders who use fundamental analysis typically take a much more long-term approach to trading, sometimes holding their positions for months or years at a time. To begin with fundamental analysis, you’ll need an unbiased source for international news and economic report data. 

Forex Trading Example in Czechia 

How do forex traders earn money? Currency values move and change in relation to other currencies. While $1 will always equal $1 in the United States, for example, $1 won’t always equal €1 in Europe. Let’s take a look at an example of a profitable currency trade.

You open a brokerage account with a broker and deposit 100,000 Kč to trade with. You believe that the value of the koruna (CZK) will soon fall in relation to the United States dollar (USD) so you use your deposit to take a margin position in the USD. 1 CZK is currently equal to 0.0430 USD, so converting 100,000 CZK leaves you controlling a position of about 4,300 USD.

Soon, you see that the value of the USD is rising — when 1 CZK is equal to only 0.04275, you decide to take your profits. You convert your entire lot of dollars back to Koruna and are left with 100,584 Kč. This means that you’ve earned a profit of about 584 Kč by strategically trading your currencies when the koruna was high in value. 

Making Money with Forex in Czechia 

Making money with forex in Czechia is possible — and Czech traders are at a few unique advantages when compared to traders from other countries. Though Czechia doesn’t use the euro as its base currency, the country is still a member of the European Union. The European Union has instituted strict checks and controls on forex brokers, including leverage limits and negative balance protections for investors. In addition to regulations that are general throughout Europe, Czechia also regulates local brokers through the Czech National Bank.

When working in combination with one another, these 2 sets of regulations make forex scams much less likely. However, this doesn’t mean that fraud has been completely eradicated in Europe. Before you open an account with any broker, be sure to ask yourself these 3 questions.

  • Is the broker licensed? Brokers operating in Czechia must be overseen by the Czech National Bank or a similar international regulatory body (like the UK Financial Audit Office).
  • Is the broker making promises that are too good to be true? You should be very wary of any “broker” or investment advisor who guarantees that you’ll earn money trading or who promises you a “secret formula” to trade.
  • Is the broker upfront with their fees? Legitimate brokers are always upfront and straightforward when it comes to account management and trading fees.

Best Online Forex Brokers in Czechia

Traders in Czechia have access to a wide range of forex brokers, and all forex brokers operating in the country must be regulated. If you don’t already know where you’d like to open an account, consider a few of our top choices below. 

  • securely through eToro Forex's website
    securely through eToro Forex's website
    Best For:
    Demo Accounts
    Rating:
    Read Review

    CFD trading is not available to U.S. users. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

  • securely through HYCM Capital Markets's website
    securely through HYCM Capital Markets's website
    Best For:
    Forex Trading
    Rating:
    Read Review
  • securely through AvaTrade's website
    securely through AvaTrade's website
    Best For:
    Non US Forex Trading
    Rating:
    Read Review
  • securely through Forex.com NON US's website
    securely through Forex.com NON US's website
    Best For:
    Forex Trading in and Outside the U.S.
    Rating:
    Read Review

    CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Forex Terminology

Understanding and mastering the forex market begins with gaining fluency in forex terminology. Forex brokers and investors have their own unique set of terms used to describe and place orders — memorizing these terms before you begin trading will make it easier to perfect your unique trading strategy. Below, you’ll find a few must-know forex terms that you’ll see again and again.

  • Pip: A pip is the smallest exchange rate movement a currency pair can make. In most cases, a single pip is a movement in the 4th decimal place. For example, if the value of the CZK franc moves from 2.2000 to 2.2001, you could say that the value changed by 1 pip.
  • Lot size: Your lot size is the standardized trading amount you use to trade, typically composed of 100,000 units of your base currency.
  • Orders: When you trade forex as a retail trader, you’ll typically work through a broker who will execute your trade on your behalf. You’ll contact your broker and request the sale or purchase of a currency pair using your broker’s order format, which is typically available through your trading platform.
  • Calls: A margin call is a requirement from your broker to deposit more trading funds into your account to make up for a decrease in value when using leverage. Margin calls can quickly lead to lost money and debt, which is why the European Union limits the amount of leverage that traders in Czechia can access.

An Evolving International Market

Though Czechia has been a member of the European Union since the mid-2000s, the country still uses its native koruna as its currency. However, in recent years, Czechia has begun on the path to adopting the euro as its base currency.

The euro is 1 of the world’s most important reserve currencies, behind only the United States dollar in terms of use. Be sure to keep your finger on the pulse of the Czech currency market and regulatory bodies to keep your strategy current and prepare for this change.

Frequently Asked Questions

Q

Is forex trading legal in Czech Republic?

A

Yes, forex trading is legal in the Czech Republic. The Czech National Bank (CNB) regulates all financial activities in the Czech Republic and they have established a framework for the regulation of forex trading. All brokers operating in the country need to be registered with the CNB and they must comply with specific rules designed to protect investors.

Q

Can I trade forex in Europe?

A

Yes, you can trade forex in Europe. The European Union (EU) offers the most liquid and heavily traded currency markets in the world. The Euro is one of the most actively traded currencies on the Forex market, and many countries across Europe have their own national currencies that are also frequently traded.

Q

What are the trade policies in Czech Republic?

A

The Czech Republic is a member of the European Union, and as such, it follows the EU’s strict trade policies. The country has adopted a market-oriented approach to international trade, seeking to facilitate access to its markets for goods and services from other countries by removing barriers and creating open competition.

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About Sarah Horvath

Sarah is an expert in the insurance, investing for retirement and cryptocurrency space.