Trading forex is an exciting way to invest, and although it takes a lot of knowledge and a great forex broker, the market is open to anyone in Italy. With the potential for high returns and the convenience of online trading platforms, forex has attracted both experienced investors and beginners looking to enter the financial markets. If you are going to trade forex in Italy, you first need to understand the market.
In this article, Benzinga covers the basics of forex trading in Italy, including regulations, key factors to consider before getting started and tips for success in this dynamic and fast-paced market. If you’re ready to get started in forex trading as an Italian resident, keep reading.
How to Get Started with Forex in Italy
Before you trade forex in Italy, you’ll need to get started with a forex broker that supports Italian traders. Though the prospect of opening a forex trading account might seem confusing and intimidating, it’s actually pretty simple. Use the following steps to set yourself up with a currency exchange account.
Step 1: Find a Stable Internet Connection
The first thing you’ll need to trade forex is a reliable and stable internet connection. No matter if you’re trading from a phone, tablet or desktop computer, make sure your internet connection is consistent before you begin trading.
Step 2: Choose an Online Forex Broker
An online forex broker accepts and completes currency orders on your behalf. Though there are few domestic Italian brokers, international brokers based in the United Kingdom, Germany and other parts of the EU all allow Italian residents to open an international account. Choose an online broker with fees, tools and services that fit your needs. Then, open an account.
Step 3: Choose a Trading Platform
If your broker doesn’t offer a proprietary trading platform, you might need to download a 3rd-party charting software like MetaTrader 4 or 5. Choose a trading platform that’s compatible with your brokerage account.
Step 4: Fund Your Account
After your account is opened, you’ll need to deposit funds into your brokerage account to trade with. Most Italian traders accomplish this by linking their bank accounts to their brokerage account and transferring money between accounts directly.
Step 5: Place Your First Trade
Once your funds clear and your account is fully opened, you can officially make your first forex trade by placing an order through your forex broker.
Italy Forex Trading Strategies
There are two major types of analysis that traders use to determine which currency pairs to buy and sell: fundamental and technical.
- Fundamental analysis involves looking at a country’s GDP strength, political events, exports, unemployment rates and other economic indicators to determine which currencies will move in value.
- Technical analysis uses charting software to predict short-term price movements based on patterns, data sets and how that currency has moved in the past.
Most traders who hold the euro as their base currency trade the EUR/USD currency pair. This pair is considered to be one of the safest and most liquid, as both the EUR and USD are major reserve currencies. Let’s take a look at a few technical indicators you might want to incorporate into your unique trading strategy when trading the pair.
Breakout Strategy
The breakout strategy is a relatively simple, popular trading strategy for the EUR-USD pair. First, set your candlestick chart to 30-minute or 1-hour intervals. Then, look for periods of low volatility — you’ll notice rectangles of little movement when prices aren’t fluctuating. When a candlestick “breaks out” of this trend by hitting a high or low outside of the standard range, this may indicate a signal to buy or sell as the trend continues.
Reversal Signals
A reversal signal is a candlestick pattern that indicates that a trend is likely to reverse. For example, the value of the EUR in comparison to the USD may rise until a reversal candlestick is formed. At that point, many traders sell their lot when the candlestick is confirmed bearish.
Reversal candlesticks may also be used to indicate a new upward reversal. There are a number of both bullish and bearish reversal signals that may indicate a shift in movement.
These signals and strategies aren’t foolproof guarantees that you’ll make money forex trading. However, they may provide a bit of valuable insight that you can use to create your own strategy. Be sure to test out these strategies on a demo account before you commit any of your own money.
Forex Trading Example in Italy
Let’s take a look at an example of how you might earn money trading forex as an Italian trader.
Imagine that you open a brokerage account and fund your account with 10,000 euros. You believe that the value of the euro is going to fall in comparison to the Japanese yen in the near future, so you invest all of your euros into the yen at a rate of 1 EUR to 120.00 JPY. Your forex broker also offers you 10:1 leverage, which allows you to purchase 100,000 EUR worth of JPY. In total, you’re left with 12 million JPY.
Soon, you see that your hunch was correct —1 EUR is now worth only 118 JPY, so you decide to sell. Converting your entire 12 million lot of JPY leaves you with about a total of 102,067 EUR. After you return the money that you borrowed in the margin, you’ve earned about 2,067 euros in profit by timing your currency purchase and buying when rates were more favorable for your native currency, the EUR.
Understanding Forex Trading in Italy
Though the Italian forex market isn’t as large as other countries in the European Union, forex trading is legal and regulated in Italy. Every day citizens are free to speculate on currencies, open their own brokerage accounts with international countries and convert euros at their discretion. Forex trading in Italy is regulated under the Commissione Nazionale per le Società e la Borsa, or “CONSOB” for short. As with every country in the EU, forex trading is also subject to rules set forth by the European Securities and Markets Authority (ESMA).
Though currency trading in Italy is legal and readily available, your responsibilities as a trader don’t end with opening an account. Be sure to carefully document your profits and report what you earn in full. Failing to report the full amount of money you earn may leave you liable for tax penalties.
Best Online Forex Brokers in Italy
Many international forex brokers offer currency trading access across the European Union — including Italy. The FX brokers that you choose will influence how much you pay in fees, the services you have access to and the currencies you’ll be able to buy and sell. If you aren’t sure where you’d like to open a brokerage account, consider a few of our top forex broker choices below.
78.1% 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.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.6% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Over-the-counter derivatives are leveraged products that carry a high level of risk to your capital. Trading is not suitable for everyone and may result in you losing substantially more than your initial investment. You do not own, or have any rights to, the underlying assets. You should only trade with money you can afford to lose.
- Best For:Beginner forex and CFD traderssecurely through XM Group's website
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.89% 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.
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.
Forex Terminology
Before you start trading currencies, it can be helpful to understand some of the most common forex terms you’ll see from your forex broker and fellow forex traders. Familiarize yourself with at least the terms below before you begin.
- Pip: A pip is the smallest calculatable unit of any given currency. In the context of most major currencies, this is the 4th decimal place. For example, if the USD rises in value from 1.0001 to 1.0002, we’d say that the value has risen by 1 pip.
- Lot size: Your lot size is the total number of units of currency you’re moving in 1 single order. For example, if you place an order to buy 100,000 Japanese yen, your lot size is 100,000.
- Orders: An order is a set of instructions you give to your forex broker that tells them what type of currency you want to buy or sell. There are many types of orders — using a variety of order types can prevent excessive losses, ensure that an order is executed at a specific price and automatically sell when your currency hits a specified price.
- Call: A margin call is a major risk that comes with using leverage to trade. If you use leverage and your total equity falls below a certain percentage, your broker may subject you to a margin call. If you receive a margin call, you must deposit a set amount of money into your account to bring your equity back up to an acceptable level to maintain your position.
Mastering the Forex Italy Market
The Italian forex market is beginning to take shape — more and more forex brokers are taking notice and opening their services to Italian account holders. But opening an account with forex trading brokers is the easy part — developing your own trading strategy and executing it can be significantly more difficult. Be sure to leave yourself with plenty of time to do your research and practice with a forex demo account before investing any of your own money.
Frequently Asked Questions
Can I trade forex in Italy?
Yes, you can trade forex in Italy. It is popular among Italian residents.
Is it safe to trade forex in Italy?
It is safe to trade forex in Italy as long as you use a regulated and reputable broker.
Which European country is best for forex traders?
A few major European hubs include London and Cyprus.
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About Sarah Horvath
Sarah is an expert in the insurance, investing for retirement and cryptocurrency space.