How to Open a Forex Trading Account

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Contributor, Benzinga
June 15, 2023

If you’ve ever thought of trading forex but have no idea how to get started, this article will let you know how to open a forex trading account. Opening a forex trading account does not require an initial deposit since many online forex brokers offer a forex demo account so you can check out the broker’s services and trading platform without making a financial commitment.

By opening a forex demo account, you can learn how forex trading works from a practical perspective. Most online brokers offer a great deal of information about the forex market to help novice clients get started. In the following article, Benzinga shows you how to open a forex trading account and provides you with excellent forex broker choices.

Disclosure: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% 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.

What is a Forex Trading Account?

A forex trading account is a margin account opened with an online forex broker that gives retail traders access to operate in the massive foreign exchange market.

Having a forex trading account will generally let you trade in all major and minor currency pairs, as well as in some exotic and emerging market pairs. Some online brokers also support trading in cryptocurrencies.

Once you have gotten some experience trading forex in a demo account, have taken any forex training you require and feel confident with your trading plan and strategy, you can then take the next step to open and fund a live margin account.

Types of Forex Accounts

You can select from several different types of forex trading accounts depending on your needs and the amount of funding you choose to operate with. Benzinga discusses the different types of forex trading accounts you can open with an online broker below.

Demo Account

A demo account generally requires no initial deposit and lets you use virtual money to simulate real-time forex market trading conditions. A demo account is a useful learning tool that lets you practice trading without taking financial risks.

Live Account

A live account refers to a trading account with actual funding, so any account that has a cash deposit is considered a live account. Once you have experience and confidence derived from practicing trading in a demo account and developed a sound trading plan and strategy, you might then want to open and fund a live account so you can trade currency pairs on margin. When funding a live account, use capital that you can easily afford to lose entirely since most retail forex traders lose money.

Mini, Micro or Nano Accounts

Mini, micro and nano accounts let you trade in multiples of minimum lot sizes of 10,000, 1,000 or 100 base currency units respectively. These represent fractions of a standard-sized lot of 100,000 base currency units. Depending on the amount of capital you wish to risk, you can usually find a broker that will let you operate in any of these lot sizes.

Since appropriate position sizing is an important factor in most sound money management strategies, mini, micro and nano accounts provide more flexibility when sizing positions than a standard account where you can only trade in multiples of standard lot sizes. Also, traders with limited funds can start with a nano account and work their way up to a standard account over time if their account balance grows.

If you only have limited experience trading forex or haven’t devised a viable trading plan despite practicing in a demo account, you might want to start with a nano account first and stick to a short-term strategy like scalping or day trading to help conserve your trading capital while you practice. Practicing will help you develop a strategy and increase your confidence in implementing it, as well as prepare you to trade in larger lot sizes.

Standard Account

A standard account means an account where the minimum trading unit is one standard lot of 100,000 currency units. Opening a standard account will typically require a larger initial deposit than opening a mini, micro or nano account. Note that gains and losses on the minimum position size are 10 times more in a standard account than in a mini account.

Because of the extra risk involved, this type of account would be best for experienced and semi-professional traders. Traders with less experience can eventually graduate to using a standard account once they feel confident in their trading plan and have already developed a trading strategy that has proven successful in smaller account sizes.

Swap-Free Account

A swap-free forex trading account does not pay or receive interest for rollovers on trading positions held overnight. This sort of account is generally aimed at Muslim traders since it complies with Sharia law.

Managed Account

An account manager will operate in a managed forex trading account to trade on a client’s behalf with the client’s money. This sort of account might be suitable for an inexperienced trader who has not yet developed their own trading plan or for someone who wants to get involved in forex trading but does not have the time to devote to the process.

Professional Account

A professional forex trading account will suit well-capitalized traders who have considerable experience trading currencies and probably intend to do so on a full-time basis.

What You Need to Open an Account

When opening a forex trading account at an online forex broker, the broker will require you to provide several pieces of information and supporting documentation to identify yourself. You should have the following information, documents and other items on hand when visiting an online broker’s website to open a forex trading margin account.

  • Your legal name
  • Your physical and mailing addresses
  • Your Social Security number if you live in the U.S. or another tax ID number appropriate for your country of residence
  • Photos of the front and back of your government-issued identity card
  • A broker-approved payment method to fund the account with such as a credit or debit card, an ewallet or a bank account

Once you have gotten those items together, you are ready to follow the five easy steps detailed below to open a forex trading account.

5 Steps for Opening a Forex Trading Account

Opening a forex trading account with an online forex broker should not take long and is relatively easy in most cases. Follow the steps outlined below to open a live forex trading account.

Step 1: Choose a Forex Broker

For your protection, you will want to select a reputable broker to open an account with and ensure that they comply with applicable laws and regulations. If you feel unsure about a certain broker, you can look them up on their regulator’s website to see if they remain licensed and have any pending regulatory issues. For example, U.S.-based online forex brokers can be looked up using the National Futures Association’s website to find out their status.

Step 2: Register with Your Chosen Broker

Once you pick a broker, you’ll have to register with it to open and fund a live margin account so you can trade currency pairs. This step will require you to produce the information listed above. You may also need to verify your identity with pictures of your valid government-issued photo ID.

Step 3: Choose Your Account Type

You should choose the right kind of trading account to open based on your unique situation and trading agenda. New traders should generally start with a demo account so that they can practice trading forex and develop a trading plan without taking any actual financial risk.

Step 4: Arrange for Transfer of Funds

Once you finish the application and registration process and verify your identity to the broker’s satisfaction, you will need to arrange for a transfer of funds into your forex trading account. Most brokers will accept several different account funding methods, such as debit or credit cards, electronic transfers from e-wallets and bank wire transfers.

Step 5: Start Trading

Once your funds have been transferred to your margin account, you can start trading forex live. Remember to put together a sound forex trading plan and develop the discipline to stick to your chosen trading strategy.

Your Entry to Forex

Opening a forex trading account is an important step in participating in the foreign exchange market. Starting with a demo account allows individuals to gain experience without financial commitment. There are different types of trading accounts available, and providing personal information and documentation is necessary. Following these five steps can help beginners start their forex trading journey. Finding a reputable broker is also important. With preparation and knowledge, individuals can trade currency pairs with confidence.

Live Account vs. Demo Account

A demo account is set up for amateurs to practice forex trading. These accounts are typically offered for free, and they replicate live forex trading conditions. You can see the changes in exchange rates in real-time while trading on a demo account. It also allows you to become familiar with the MT4 and/or MT5 trading platforms. 

Once you practice trading on demo accounts, you can begin investing in forex through your live trading account. While live trading, traders are required to invest their money, thereby assuming any and all currency- and market-related risks. Traders using leverage are required to put up only a certain percentage of the total investment value while assuming a position. They might be required to invest additional funds in the event of a margin call. 

Top Forex Brokers for Opening a Trading Account

Benzinga has compiled the table of online forex brokers below to help take the guesswork out of finding a reputable broker to trade forex through. Select one that will suit your situation and visit its website to get signed up for a forex trading account.

  • Forex.com
    Best For:
    U.S. and Global Forex Traders
    securely through Forex.com's website

    CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% to 77.7% 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.

    The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account

  • Plus500 Forex
    Best For:
    CFD Trading for Mobile Users
    securely through Plus500 Forex's website
  • City Index
    Best For:
    International Forex and CFD Traders
    securely through City Index's website

    CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% 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.

  • IG Markets
    Best For:
    Forex Execution for U.S. and Global Traders
    securely through IG Markets's website

    Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% 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.

  • AvaTrade
    Best For:
    Non U.S. Forex & CFD Traders
    securely through AvaTrade's website
  • eToro Forex
    Best For:
    Copy Trading
    securely through eToro Forex's website

    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.

Frequently Asked Questions

Q

Which forex account is best for beginners?

A

A demo account is the best type of forex account for a trader who is just starting out in the forex market. You can use a demo account to practice trading and develop your trading strategy before opening a live account funded with real money.

Q

How much money do I need to open a forex trading account?

A

While some brokers will allow you to open a forex trading account without any money, most brokers require you to fund a live account initially with between $100 to $500.

Q

Is forex trading risky?

A

Forex trading involves taking strategic risks, so it has more in common with gambling than with investing. Most retail forex traders lose money.

Get a Forex Pro on Your Side

FOREX.com, registered with the Commodity Futures Trading Commission (CFTC), lets you trade a wide range of forex markets with low pricing and fast, quality execution on every trade. 

You can also tap into:

  • EUR/USD as low as 0.2 with fixed $5 commissions per 100,000
  • Powerful, purpose-built currency trading platforms
  • Monthly cash rebates of up to $9 per million dollars traded with FOREX.com’s Active Trader Program

Learn more about FOREX.com’s low pricing and how you can get started trading with FOREX.com.

About Jay and Julie Hawk

Jay and Julie Hawk are the married co-founders of TheFXperts, a provider of financial writing services particularly renowned for its coverage of forex-related topics. With over 40 years of collective trading expertise and more than 15 years of collaborative writing experience, the Hawks specialize in crafting insightful financial content on trading strategies, market analysis and online trading for a broad audience. While their prolific writing career includes seven books and contributions to numerous financial websites and newswires, much of their recent work was published at Benzinga.