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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 even 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 any financial commitment.
By opening a forex demo account, you can learn how forex trading works from a practical perspective. Also, 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.
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 Trading 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.
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 risk.
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 you have 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. Make sure to only use risk capital when funding a live account 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.
A standard account typically 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.
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.
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 at 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 Broker
For your protection, you will want to select a reputable broker to open an account with and ensure that they comply with any applicable laws and regulations. If you ever 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 them 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 ewallets 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.
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.
- Overall RatingRead Review
Frequently Asked Questions
Which forex account is best for beginners?
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.
How much money do I need to open a forex trading account?
While some brokers will allow you to open a forex trading account without any money at all, most brokers require you to fund a live account initially with between $100 to $500.
Is forex trading risky?
Forex trading involves taking strategic risks, so it has more in common with gambling than with investing. Most retail forex traders lose money.
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