How to Navigate the Canadian Forex Market

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Contributor, Benzinga
July 14, 2023

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Nicknamed the loonie, the Canadian dollar (CAD) is the fiat currency of Canada. This North American currency is a liquid major currency that trades globally across different sessions. The Canadian forex market trades during the North American session.

Navigating the Canadian forex market requires a baseline understanding of the market. In this article, Benzinga looks at how the Canadian forex market operates, its benefits and how to minimize trading risks.

How Does the Canadian Forex Market Work?

The Canadian forex market operates like most forex markets around the globe. Traders buy and sell currency pairs like USD/CAD or EUR/CAD. Trading hours within the Canadian forex market’s North American session are usually between 8 a.m. to 4 p.m. ET. However, the times can change depending on daylight saving time changes or holidays.

Trading also overlaps with the U.S. and European forex markets, which results in increased liquidity. Participants in the Canadian forex market include dealers, financial institutions, retail traders, customers and forex brokers. Traders can trade in the Canadian forex market by placing trades through their brokers or digital trading platforms. Online forex brokers may also offer different hours of trading. The CAD itself trades around the clock across different markets.

Understanding Exchange Rates

Exchange rates show you how much you need to swap one currency for another. They are generally quoted in a ratio of one currency to another. USD/CAD pair is quoted using 1 USD per X Canadian dollars. If the pair trades at 1.3, it takes 1.3 Canadian dollars to buy 1 U.S. dollar.

Currency exchange rates are determined by several factors, which include the state of the economy, monetary policies from the central bank, interest rates or geopolitical risks. The Canadian dollar trades at a floating exchange rate, which means that the Bank of Canada doesn't intervene but lets the markets determine its rate through supply and demand.

Platforms for Trading in the Canadian Forex Market

On the Canadian foreign exchange market, traders can trade with other traders directly or through an online forex broker. When trading directly, traders buy and sell currency pairs on exchange platforms where they can set their prices. When traders use a forex broker, they can access the market from a single platform and leverage the forex broker's knowledge and technology.

Online Forex Brokers

An online forex broker is a digital trading platform that enables people to trade in the forex market. Online forex brokers are the most popular way of trading Canadian forex markets because of their convenience. However, it is important to choose a forex broker that meets your specific requirements in terms of forex trading account offerings, spreads, speed of trade execution or forex pairs. You may also want to begin trading in a demo account before engaging in foreign exchange trading in a live account.

Automated Trading Systems

An automated trading system, also known as a trading bot, is a software program that creates buy and sell orders on a currency pair at a given point in time. Orders are placed based on the trader's strategy, and predetermined guidelines are programmed within the algorithms.

How to Minimize Risks when Trading in the Canadian Forex Market

To minimize risks when trading forex in the Canadian market, you can try a few strategies. Let's take a look at them.

Understand the Forex Market

Each market has its peculiar attributes. Understanding the peculiarities of the Canadian forex market and how it operates enables you to trade forex effectively and reduce risk. For example, you would know when the market is most active, the implication of spreads or pips on your profit and how the market reacts to certain news.

Use Stop-Loss Orders

Using stop-loss orders is a viable way of minimizing risk when trading the Canadian forex market. A stop-loss order is an instruction to your broker to sell your position if the price drops to a predetermined level. Stop-loss orders are good for limiting losses or locking in profits.

Set Trading Limits

The volatility of the market and price swings can override logic and make you forgo your trading plans. One way to prevent this is by setting limits to the number of times you trade or the amount of money you trade with. This process helps to minimize your exposure to the market and the risks that come with trading frequently.

Benefits of Trading in the Canadian Forex Market

Here are some benefits that come with trading in the Canadian forex market.

  • Trading a major currency: When trading in the Canadian forex market, you trade the Canadian dollar, a highly liquid major currency, against other currency pairs.
  • Less manipulation: Unlike some other currencies, such as the Japanese yen, the Bank of Canada does not intervene in the currency. This means there is less room for surprises or manipulation of prices, which creates trust and levels the playing field for traders.
  • Strong economy: The performance of currency markets is strongly tied to their respective economies. If an economy is unstable, its currency might be volatile, which could dampen investor sentiment toward the currency. The Canadian economy is ranked ninth in the world on the basis of a relatively stable economy.
  • Regulatory framework: Forex trading in Canada is regulated by bodies such as the Financial Consumer Agency of Canada and IIROC. Individuals and organizations that offer forex trading services are expected to be registered with the latter. In addition, each province in the country has its own regulator, which helps ensure that traders are adequately protected against fraud and market manipulation.

Exchange Forex in Canada

Trading in the Canadian forex market offers you an opportunity to trade in a currency that is highly liquid and backed by a strong economy. The Canadian forex market is also a viable alternative to the U.S. forex market.

However, when choosing to trade in the Canadian forex market, make sure you find the right online broker that suits your trading requirements.

Frequently Asked Questions


Is forex trading allowed in Canada?


Yes, forex trading is allowed in Canada and is considered legal.


What time does the Canadian forex market open?


The Canadian forex market operates during the North American trading session. The market opens at 8 a.m. ET. You can also trade the CAD globally around the clock.


How much do forex traders make in Canada?


Forex traders don’t all make a specific amount in Canada. Profitability depends on experience, trading strategy and the amount of money used in trading.