How to Open a Forex Account

Online, July 15, 2014 (Newswire.com) - Trading in the Forex market is an exciting venture. With so much noise surrounding the subject, we go back to the basics and this article will be exploring the most essential information you need when opening a Forex account.

To start with, you can opt to open a live account or start with a demo account to learn the ropes. The former can be an arduous task especially for those doing it for the first time. A demo account though, is easier given the virtual nature of the account.

Majority of the brokers will follow the same requirements and principle for opening a live trading account, but there are others who will ask for additional documents depending on the financial regulations of their respective country.

A Quick Checklist

Here is a list of things you need to verify before you open a Forex account with a broker:

• Is your country on the list of eligible countries that can open a Forex account with the broker?
• Are there any fees one has to part with when depositing and withdrawing from the broker and its custodian bank?
• Does the broker support payment options present in your country’s financial institution? Is it possible to withdraw using the options the broker has adopted?

These are the first things that should come to mind when opening a live account with a broker.

Types of Accounts you can Open

Generally, all brokers have three major types of Forex accounts you can choose from:

Micro Account

A micro account is best suited for Forex beginners. Those with low capital to trade will find it ideal. There is minimal risk involved due to the micro nature of the account.

The minimum opening balance for a micro account is usually $100, with the common leverage size being 400:1.

Standard Account

A standard Forex account is targeted at traders with significantly higher capital as compared to the micro account. Trading with this type of account calls for experience in the foreign exchange market.

Many brokers will ask for a minimum balance of $2,000 or $5,000, or at times $10,000 to $50,000, and the leverage has a higher impact than a micro account: it is usually 100:1 with 100,000 trade size.

Mini Account

A mini Forex account is ideal for beginners and experts alike. It is capable of controlling one tenth of a standard account ($10,000) and the common leverage size with this type of account is 200:1.

The opening balance could be $500 or higher, and 10,000 trade size.

Never forget that the lot size varies from one Forex broker to the next. In addition to these common types of accounts, there are proprietary Forex accounts as well and these are designed with specific services and unique features in mind.

Depositing Funds into the Live Account

This will depend on the country, albeit the general principles are the same. Let’s assume you’ve downloaded the trading platform already. The one that was in use should be on a demo account, or blank assuming it’s a new one.

There is no need to download a new one for the live account if you’ve tested out the brokers’ demo account. Following the approval of your application, you will be furnished with details of the live server IP address, plus the login details.

Identify which deposit option suits you best. Each comes with its attendant fees and downsides: there are faster options, the more secure and the pricier ones. There are financial regulatory agencies that have banned the credit card option, but you will always have a great and secure alternative for depositing and withdrawing funds from your Forex account in the bank wire option.

Required Documents and Live Account Form

Knowing the documentation a broker requires is vital. Filling the live account form and getting to the documentation stage only to realise a certain document is not available in your locality or country would be a total waste of time.

Most brokers will often ask for:

• Proof of legal identification
• Proof of legal address
• Employment status
• Bank statement is required by some
• Utility bill receipt

Additionally, the details that are required to fill in the live account form, whether online or offline include:

• Personal information (full name, date of birth etc.)
• Contact information (phone number, email address, city, Postal ZIP code, country etc.)
• Investor information (employment status and field, net worth excluding personal income, currency type etc.)
• Trading knowledge (experience in Forex, stocks, options, CFDs, futures etc. – necessary for advisory purposes).

The reason your broker needs so much information is simply to abide by the laws of Forex trading. Additionally, these requirements were necessitated some time ago in a bid to safeguard account holders from potential harm.

Open a Domiciliary Account

A domiciliary account, or foreign account, is one that holds international currency normally in dollars, euro or pounds.

With it, you can conduct international transactions from you home country. To open one, you need to have a current account first.

Get the required Deposit Currency

Majority of the Forex brokers have a universal currency for deposits, most often the US Dollar, but other currency deposits like pounds or euro are also accepted. You have to convert your local currency into the deposit currency, and get the latest exchange rates before venturing into the market.

Make sure to include your local bank and broker’s fees in the total amount you plan on purchasing from the currency market for depositing into your live account. Otherwise you’ll get lower figures in your account given that banks will take their cut before crediting your Forex account. Enquire from your bank the amount of fees required to make a transfer as well as the fees your broker will be deducting from the total deposit.