Forex Trading in Romania

Though Romania doesn’t have the largest forex market in Europe, growing access to the market through international brokers has made it easier than ever before to trade forex.

In this article, Benzinga will explore the basics of forex trading in Romania, including important factors to consider, common strategies used by traders and key resources to help you get started. This guide will provide valuable insights to help you navigate the forex market in Romania effectively.

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Get Started with Forex in Romania

You’ll need to open an account with a forex broker before you can trade forex. Thankfully, there are many different forex brokers in Romania that offer access to margin trading and nearly every country’s currency. Here’s how you can get started by opening your first account:

• Connect to the internet: The most important tool that a forex trader can have at their disposal is a solid, stable internet connection. Run a speed test on your device of choice before you open your account.
• Choose a broker: All brokers operating in Romania must submit to a number of regulatory bodies, including the Financial Supervisory Authority. Research each broker’s licensure status, fees and available currencies before you open an account.
• Download a trading platform: Your broker may offer a proprietary platform or you might need to download a 3rd-party trading platform like MetaTrader 4 before you can get started. Check and see which platforms your broker supports before you download a trading platform.
• Fund your account: After your account has been opened in full, you’ll need to add trading funds. Most Romanian brokers allow you to fund your account using a debit card, direct bank transfer or transfer from an electronic wallet service like Skrill or PayPal. It may take a few days for your funds to clear before you can see them in your brokerage account.
• Make your first trade: As soon as your funds clear, you can place your first forex trade. 

Romania Forex Trading Strategies

Though Romania is a member of the European Union, the country still uses the Romanian leu as its base currency. The leu shows more volatility than reserve currencies like the U.S. dollar and the euro. Forex traders often take advantage of this volatility by using a technical analysis-based strategy.

Technical analysis is a type of currency analysis that relies on the use of charts and patterns to predict how the currency will move in the future. Traders who use technical analysis as their primary trading strategy typically choose a select number of patterns and formations, allowing specific pattern formations to trigger “buy” or “sell” signals.

Let’s take a look at a few of the most common technical analysis strategies that Romanian traders use to capitalize on the leu’s volatility. Though these indicators aren’t guarantees that you’ll earn money trading, they can act as a solid basis around which you can form your own unique trading strategy.  

Triple Bottom

A triple bottom pattern is a bullish indicator that establishes a lower resistance line and signals that the currency you’re trading may show a price trend reversal soon. To act as a true triple bottom, the formation must have an existing downtrend, establish 3 lows roughly equal in price and a significant volume drop as these lows are formed. When trading the triple bottom, you may want to execute up to 3 short-term trades or a single long-term trade, selling when the pattern is complete and the currency shows a new, bullish pattern.   

Reversal Candlesticks

Reversal candlesticks are formations that indicate that a currency may reverse its trend. A reversal candlestick can be bullish or bearish depending on its placement and strength. Most traders consider the length of a candlestick’s tail to be an indicator of how strong the signal is — the longer the tail, the more likely that the reversal candlestick will be confirmed.    

Forex Trading Example in Romania 

How does forex trading work exactly? Let’s take a look at an example of how you might be able to earn money by taking advantage of discrepancies between currencies.

You open an account with L10,000. Your broker offers you 10:1 leverage, which means that you can trade with the power of L100,000 despite only having L10,000 in your account.

You believe that the RON will fall in value in relation to the EUR, so you convert your entire lot of RON into EUR. The euro is currently trading at 1 RON to 0.21 EUR — when you use your entire leverage and initial deposit, you’ve left with 21,000 EUR.

A few days pass and you see that your assumption is correct — the value of the 1 RON has fallen to just 0.20 EUR. You decide to convert your entire lot of EUR back to RON, which leaves you with L105,000. On this trade, you’ve made a profit of L5,000 by strategically converting your currencies when the value of the RON was set to fall. 

Making Money with Forex in Romania

Earning money by trading forex in Romania is completely legal and there are no limitations on the amount of profit that you can take from your trading. The forex trading market of Romania is also exceptionally well regulated when compared to other developing nations. Every broker legally operating in Romania is required to register with the Financial Supervisory Authority (ASF in Romanian). The ASF is responsible for fighting against market manipulation and ensuring that every broker’s credit rating is high enough to ensure that the brokerage firm has enough money to refund all traders’ deposits should the broker go out of business.

Romanian brokers are also subject to a wide range of trader protections under the European Union’s European Securities and Markets Authority. This authority directs EU trading activities, imposes a leverage cap on trading and investigates insider trading. Working together, these authorities greatly reduce the instances of forex scams both in Romania and throughout Europe.

There are a few steps that you can take to protect yourself and your capital when you trade. Be sure that your broker is registered before you open an account and be very mindful of your leverage usage. You should also keep careful records of your profits and the amount of money you move on each trade so you can accurately report your income during tax season. 

Best Online Forex Brokers in Romania 

The forex broker you choose will determine which currencies you have access to, how much you’ll pay to trade, which trading platforms you can use and much more. If you aren’t sure where you’d like to open an account, consider a few of our top choices below.  

Forex Terminology

Understanding the unique terminology used by forex traders and brokers will give you an advantage when planning your trades and doing your research. Here are a few of the most common terms you’ll hear when you trade forex:   

• Pip: A pip is the smallest unit by which a currency can change in value. In most cases, 1 pip is equal to 0.0001 of any currency’s value. The only exception to this is the Japanese yen, which is rounded to 2 decimal places.
• Lot size: Your lot size is the number of units of any currency you’re buying or selling. For example, if you decide to sell L10,000, your lot size is equal to 10,000. Most forex traders consider 100,000 units to be a “standard lot.”
• Orders: When you place an order through your broker, you tell your broker how many units of currency you want to trade, the price the order should be executed at and which currencies you want to exchange. There are multiple different types of orders, and each order type presents its own challenges and advantages when it comes to liquidity and loss prevention.
• Call: A call (or a “margin call”) is a risk that comes along with using leverage to trade. If your forex portfolio falls below a certain percentage of its original value when using leverage, your broker will subject you to a call. When you receive a call, you must deposit more capital into your account in order to maintain your position. 

Getting Ready to Make Your First Trade

Though forex trading in Romania is safe and well-regulated, this doesn’t mean that you’re guaranteed to make money exchanging currencies. Be sure to practice your trading strategy using a demo account or paper trading account before you invest. This will help you avoid losses while also sharpening your skills before you enter the market with real money. 

Frequently Asked Questions