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Forex Trading in France

Written By

Christian Harris

Written By

Christian Harris

Christian is a seasoned journalist with decades of experience. He transitioned from tech journalism to finance to follow his interest in investing. He has been trading stocks, futures, forex, and cryptocurrencies for more than 5 years, becoming an eToro Popular Investor. With hands-on expertise across various assets, he offers valuable trading insights.

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Edited By

James Barra

Edited By

James Barra

James is an investment writer with a background in financial services. As a former management consultant, he has worked on major operational transformation programmes at prominent European banks. James authors, edits and fact-checks content for a series of investing websites.

» James Barra Profile Page

Fact Checked By

Michael MacKenzie

Fact Checked By

Michael MacKenzie

Michael is a writer and editor with over a decade in journalism and publishing. His niche lies in editing and fact-checking content in the financial services sector, with a focus on online brokers and trading platforms. Michael previously reported on politics and economics in the Middle East and edits books for established publishers.

» Michael MacKenzie Profile Page

Updated

Aug 15, 2024

France, a powerhouse in the European economy, has a dynamic trading landscape, and forex is no different.

Currency trading in France is a popular financial activity, with the latest Triennial Survey from the Bank for International Settlements (BIS) showing France traded a daily average of $214 billion in foreign exchange instruments in 2022, a 28% increase from $167 billion in 2019.

This guide explores forex trading in France, equipping you with practical advice and walking you through an example trade to illustrate key concepts.

Quick Introduction

• In France, the Autorité des Marchés Financiers (AMF), the country’s financial watchdog, oversees all financial markets, including forex trading.
• Profits from forex trading in France are subject to taxation. For private individuals, these profits are typically considered capital gains.
• ESMA regulations cap retail traders’ leverage at 1:30 for major currency pairs like EUR/USD and 1:20 for minor currency pairs like EUR/GBP.

How Does Forex Trading Work In France?

Forex trading in France involves buying and selling currency pairs in the foreign exchange market, such as EUR/USD (euro/US dollar), to profit from changes in prices.

To start trading currencies online in France, you’ll need to:

1. Open an account with a forex broker – we recommend choosing an AMF- or alternative EU-regulated firm.
2. Deposit funds – consider opting for a broker with a EUR account to minimize conversion fees.
3. Execute trades – your broker will provide a desktop, mobile, and/or web-based platform.

Is Forex Trading Legal In France?

Yes, forex trading is legal in France. However, the French market is heavily regulated to protect traders, with stricter regulations than some other countries.

As a member of the European Union, France adheres to European Securities and Markets Authority (ESMA) regulations, which include rules on leverage limits, negative balance protection, and the provision of risk warnings to clients.

The Markets in Financial Instruments Directive (MiFID II) also applies in France. It enhances transparency across the EU’s financial markets and standardizes regulatory disclosures.

Is Forex Trading Taxed In France?

For private individuals, forex trading profits are generally considered capital gains. These capital gains are taxed at a flat rate of 30% at the time of writing, which includes 12.8% for income tax and 17.2% for social security contributions (Prélèvements Sociaux).

You must declare your forex trading profits in your annual tax return. If your capital gains exceed certain thresholds, you may need to provide additional documentation and details of your transactions.

If forex trading is your primary source of income or if you trade frequently, the tax authorities may also consider you a professional trader. In this case, your trading profits are treated as business income.

Professional traders are subject to progressive income tax rates ranging from 0% to 45%, depending on your total taxable income. Additionally, you may be required to pay social security contributions. As a professional trader, you may need to register as a business or self-employed (auto-entrepreneur) and adhere to relevant business regulations.

Both private individuals and professional traders can offset forex trading losses against profits to reduce their taxable income. However, specific rules and limits exist on how and when you can offset these losses.

Tax laws and regulations can change, so I recommend staying updated with the latest information from the French tax authorities (Direction Générale des Finances Publiques—DGFiP).

Ensuring compliance with tax laws and regulations is crucial to avoiding penalties and optimizing tax liabilities.

Christian Harris

Author

When Is The Best Time To Trade Forex In France?

French forex traders often find the most success during the overlap of major global trading sessions. These sessions bring together a large pool of participants, boosting market activity and creating more short-term trading opportunities.

The London session (9:00 to 18:00 local time) is a central hub due to the significant volume of transactions processed in London. The US session (14:00 to 23:00 local time) is another period of high activity influenced by economic data releases from the United States.

The London-US session overlap (14:00 to 18:00 local time) combines European and American markets, often resulting in the most intense trading activity during the French trading day.

Example Trade

To help you understand how trading currencies in France works in practice, I’ve detailed a scenario that demonstrates a day trading strategy for the EUR/GBP currency pair.

Event Background

I was closely monitoring the economic calendar and noticed a significant upcoming announcement from the International Monetary Fund: the release of France’s latest quarterly GDP growth figures.

This event, scheduled for early morning, was expected to have a notable impact on the EUR/GBP currency pair.

Economic data releases, such as GDP growth, can cause considerable volatility in the forex market as they provide insight into a country’s financial health.

Given the potential implications for the euro, I decided to prepare for a possible day trade based on the outcome of this announcement.

Interpretation of Data

On the morning of the announcement, I was ready at my trading desk, having analyzed previous GDP releases and their impacts on the EUR/GBP pair.

The data released showed that the French economy rose to 0.2% in Q1 2024, up from 0.1% in the previous quarter.

Therefore, I expected that the euro might appreciate against the British pound in the short term due to increased investor confidence in the French economy.

Trade Entry

Interpreting this data, I entered a long position on the EUR/GBP pair, anticipating an increase in the euro relative to the pound.

Just minutes after the announcement, I placed my trade. Using my trading platform, I entered a buy (long) position with a 25-pip stop-loss to manage risk in case of a sudden market reversal. I decided not to set a take-profit order, aiming to capitalize on the whole daily move.

Trade Exit

Over the next few hours, I watched the market closely as the EUR/GBP pair increased. The currency pair made a significant pullback but continued rising for the rest of the day. I closed my position manually before the end of the US session for a 53.6-pip gain to avoid overnight fees and market volatility.

Post-Trade Analysis

After exiting the trade, I conducted a post-trade analysis to evaluate my decision-making process. The trade had gone as planned, with the higher GDP figures leading to a rally in the euro, just as I had anticipated.

After reviewing this forex trade, I concluded that my preparation and quick interpretation of the economic data were crucial to its success. The French economic announcement had a clear and immediate impact on the EUR/GBP pair, demonstrating the importance of staying informed about key economic events and their potential market implications.

This experience reinforced my confidence in using fundamental analysis for day trading in the forex market.

Bottom Line

Forex trading in France is legal and well-regulated. It is overseen by the AMF and adheres to ESMA regulations. These regulations include strict rules on leverage, negative balance protection, and transparency to protect traders.

Compared to other countries, France has a robust regulatory framework similar to those of other EU countries, ensuring high levels of investor protection.

However, traders in France must also navigate specific tax obligations. Forex trading profits are subject to capital gains tax for private individuals and income tax for professional traders.

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