With a staggering market trade of $750 billion, the foreign exchange (forex or FX) market has cemented its position as one of the largest and most dynamic markets globally. Its allure lies in the high liquidity it offers along with the round-the-clock availability for investors.

Over the past five years, the popularity of forex trading has been steadily on the rise, reaching a peak with a 300% surge in trading volumes in 2020. The global interest in forex trading remains significant, evident from the 127% increase in search volumes for "how to trade forex" between February and April 2023.

In an effort to identify the most favorable countries for forex traders, City Index devised a points-based index system. The evaluation criteria included net gross turnover of forex instruments, cost of living, broadband internet speeds, and forex trading hours across 50 countries. The results shed light on the top countries worldwide for forex trading.

The results:

The full dataset used throughout this study 

While reports confirm Singapore's retention of its status as the third-largest FX center globally based on daily trading volumes, City Index reveals that Singapore is the most suitable country for forex traders. With an overall forex suitability score of 8.07 out of 10, Singapore's superiority stems from its substantial turnover of OTC foreign exchange instruments, amounting to $929 billion, which is six times higher than China's $153 billion.

In addition, Singapore boasts the fastest average broadband speed among all countries analyzed, clocking in at 233.455 Mbps. This figure is 131% faster than neighboring Malaysia's broadband speed of 100.84 Mbps, making Singapore an ideal location for online trading. Despite having limited overlap with London, which boasts the highest market activity and pip movement, Singapore ranks high in terms of time overlap hours with Tokyo and Sydney, as most forex traders prefer trading between 08:00 and 18:00 local time.

Fawad Razaqzada, a forex trading expert from City Index, emphasized the significance of fast broadband speeds for traders, stating, "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, minimizes the risk of connection drops or disruptions, and facilitates multi-platform trading across several devices."

China secured the second spot with a forex suitability score of 7.97 out of 10, despite being surpassed by Japan ($43 billion) and Hong Kong ($694 billion) in terms of turnover of OTC foreign exchange instruments. China benefits from a high market overlap score of 9.02 out of 10 due to its time zone aligning with four key markets. Furthermore, the country boasts a fast average broadband speed of 156 Mbps, which is more than double the average speed in Vietnam (74.39 Mbps).

China's advantage is further amplified by its low cost of living (ranked 83), positioning it 47 places higher than Vietnam (ranked 35.7). A low cost of living holds appeal for forex traders, as it signifies a healthy or growing economy, offering more opportunities for returns and greater disposable income to boost trading capital.

The cost of living exerts a potential influence on trading profitability as it affects various aspects of overall expenses, including housing, transportation, taxes, and routine costs. By limiting potential investment expenditure, a lower cost of living creates a favorable environment for forex traders.

Despite Japan's net-gross turnover of OTC foreign exchange instruments amounting to $433 billion, 183% higher than China's $153 billion, it secures the third position in the index with a forex suitability score of 7.64 out of 10. This is partly due to Japan's comparatively lower cost of living (ranked 29), which is 22 places higher than Singapore's (ranked 7) in terms of living affordability. Additionally, Japan boasts a high market overlap score of 8.63 out of 10, considering the hours of time overlap with the Tokyo and Sydney markets. It also enjoys a moderate average broadband speed of 157.71 Mbps, which is 68% faster than the United Kingdom's speed of 93.52 Mbps.

While the United Kingdom ranks eighth in the index, it excels in terms of net-gross turnover of OTC foreign exchange instruments, claiming the highest position worldwide with a turnover of $3,755 billion in 2022. This figure is 98% higher than that of nearby France, which recorded a turnover of just $214 billion during the same period. Moreover, the UK demonstrates the most significant pip movement among the four major markets—Sydney, Tokyo, and New York—when analyzing currency pairs.

Fawad Razaqzada, the forex trading expert from City Index, explains, "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 sessions are open – which is between 8:00 and 9:00 GMT."

Source: City Index

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