If you have ever thought of trading forex but have no idea how to start, this article will teach you how to open a forex trading account. Opening a forex trading account does not even require an initial deposit as many online forex brokers offer a forex demo account so you can test 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 point of view. Also, most online brokers provide a lot of information about the forex market to help inexperienced clients get started. In the following article, Benzinga will show you how to open a forex trading account and offer you an excellent choice of forex brokers.
What is a forex trading account?
A forex trading account is a margin account opened with an online forex broker that allows retail traders to access the massive forex market.
With a forex trading account, you can generally trade all major and minor currency pairs, as well as some exotic and emerging market pairs. Some online brokers also support cryptocurrency trading.
Once you have some experience trading forex on a demo account, have completed all the required forex training and feel confident with your trading plan and strategy, you can take the next step to open a live margin account and become finance.
Types of Trading Accounts
You can choose from several different types of Forex trading accounts depending on your needs and the level of funding you want to work with. Benzinga explains below the different types of forex trading accounts you can open with an online broker.
A demo account generally does not require an initial deposit and allows you to use virtual money to simulate trading conditions in the forex market in real time. A demo account is a useful learning tool that allows you to practice trading without taking any financial risk.
A live account refers to a trading account with actual funding, therefore any account with a cash deposit is considered a live account. Once you have gained experience and confidence from practicing trading on a demo account and have developed a solid trading plan and strategy, you may wish to open and fund a live account so that you can trade currency pairs on margin. Make sure you only use venture capital when funding a live account that you can easily afford to lose as most retail forex traders lose money.
Mini, micro or nano accounts
Mini, Micro and Nano accounts allow you to trade in multiples of minimum lot sizes of 10,000, 1,000 and 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 trade any of these lot sizes.
Since appropriate position sizing is an important factor in most sound money management strategies, mini, micro and nano accounts offer more flexibility in sizing positions than a standard account, which only allows you to trade 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 as their balance grows.
If you have limited forex trading experience or haven’t developed a viable trading plan despite practice 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 save your trading capital while you practice. Practice will help you develop a strategy and increase your confidence in executing it, as well as prepare you to trade larger lot sizes.
A standard account usually means an account where the minimum trading unit is a standard lot of 100,000 currency units. Opening a standard account usually requires a larger initial deposit than opening a mini, micro or nano account. Note that with the minimum position size, profits and losses are 10 times higher in a standard account than in a mini account.
Due to the added risk involved, this type of account is best suited for experienced and semi-professional traders. Eventually, less experienced traders can move on to using a standard account once they feel confident in their trading plan and have already developed a trading strategy that has proven successful with smaller account sizes.
Exchange the free account
A swap-free forex trading account pays or receives no interest on rollovers on trading positions held overnight. This type of account is generally aimed at Muslim traders as it complies with Sharia law.
An account manager operates a managed forex trading account to trade the client’s funds on behalf of a client. This type of account might be suitable for a novice 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 suits well capitalized traders who have significant experience trading currencies and are likely to want to do so on a full-time basis.
What you need to open an account
When you open a forex trading account with an online forex broker, the broker will ask you to provide several pieces of information and supporting documents to identify yourself. You should have the following information, documents, and other items on hand when you visit an online broker’s website to open a margin account for forex trading.
- your real name
- Your physical address and mailing address
- Your social security number if you live in the United States, or another tax identification number that corresponds to your country of residence
- Photos of the front and back of your official ID card
- A payment method approved by the broker to fund the account, e.g. a credit or debit card, e-wallet or bank account
Once you have put these articles together, you can follow the five simple steps outlined below to open a forex trading account.
5 Steps to Opening a Forex Trading Account
Opening a forex trading account with an online forex broker shouldn’t 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 should choose a reputable broker to open an account with and make sure they comply with all applicable laws and regulations. If you ever feel unsure about a particular broker, you can look them up on their regulator’s website to see if they’re still licensed and if there are any outstanding regulatory issues. For example, online forex brokers based in the US can be searched for by their status through the National Futures Association website.
Step 2: Register with your chosen broker
Once you have chosen a broker you will need to register with them to open and fund a live margin account so that you can trade currency pairs. This step requires you to provide the information listed above. You may also be required to verify your identity with images of your valid government-issued photo ID.
Step 3: Choose your account type
You should choose the right type of trading account to open based on your unique situation and trading agenda. New traders should generally start with a demo account so they can practice forex trading and develop a trading plan without taking any actual financial risk.
Step 4: Organize the money transfer
Once you have completed the application and registration process and verified your identity to the broker’s satisfaction, you will need to initiate a transfer of funds to your forex trading account. Most brokers accept several different account funding methods such as B. Debit or credit cards, electronic transfers from e-wallets and bank transfers.
Step 5: Start trading
Once your funds have been deposited into your margin account, you can start live forex trading. Remember to put together a solid 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 take the guesswork out of finding a reputable broker to trade forex. Pick one that suits your situation and visit the site to sign up for a forex trading account.
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CedarFX is not regulated by any major financial agency. The brokerage firm is owned by Cedar LLC and is based in St. Vincent and the Grenadines.
$200 AUD or equivalent
$100 (or equivalent)
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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 allow you to open a forex trading account with no money at all, most brokers require you to fund a live account with between $100 and $500 first.
Forex trading involves taking strategic risks, so it has more to do with gambling than investing. Most retail forex traders lose money.