Forex trading is a very exciting and profitable business. Before you begin trading forex you will need to open a forex account. This tutorial will explain what a potential trader should know before opening a trading account in addition to all the requirements for opening a real forex account or a demo forex account. After the trader has chosen the forex broker, the actual opening of the forex account only takes a couple minutes. All brokers recommended on ForexGator.com provide bonuses to traders that originate from our website. This is a huge benefit to new traders since it will provide additional capital and increase their return on investment.
Comparable to trading equities, trading forex requires the individual to open a forex brokerage account. Forex accounts differ depending on the services that they provide. It is important that the trader understands what type of account they require before starting registration. Below, we will explore what a typical forex account registration process consists of including; information required, leverage, commissions, fees and order types.
When opening a forex account, the following information is required:
*Account Currency Type
*Username and Password for the Trading Account
*Date of Birth
*Country of Citizenship
Normally there will be additional questions (possibly financial questions) depending on the brokerage you register with. These questions are required depending on the regulation and licensing of the brokerage. It is also common practice for the forex brokerage to request an ID/passport copy and a copy of a utility bill to verify the trader’s address. This is to complete the KYC (know your customer) of each trader.When the trader’s identity has been confirmed it protects all parties involved including meeting all of the new anti-money laundering requirements. Lastly, you will need to read and agree to the risk disclosures. After your information has been verified, you are now ready to fund your account and start trading forex.
Leverage is a huge upside to trading forex versus trading equities. It allows traders to control large amounts of capital with little of the trader’s own money; however, the higher the leverage, the higher the risk. The amount of leverage varies from one forex brokerage to another forex brokerage. Some brokerages allow traders 50:1 leverage while others allow up to 888:1 or 1000:1 leverage.
Leverage is an advantage, since it allows the forex trader to make huge gains with a minimal investment. A $1,000 investment at 888:1 leverage translates to $888,000 of capital to buy and sell currencies with.Leverage works both ways though. A loss with leverage is much larger and may be larger than the trader’s initial investment; leverage must be used carefully. It is very important that the trader is aware of this when they open their account.
Commissions and fees are another advantage to trading forex versus trading equities.When trading equities, the investor is charged a fee when they buy and when they sell. In forex,there are no brokers per se; the investor is trading directly with the market makers (through a brokerage).
Clearly the forex brokerages make money however it is not in the form of a normal commission. Every time a trade is executed there is a bid and ask price. The brokerage makes the spread between these two. Each forex brokerage has different spreads on their foreign currency pairs; normally only differing by a couple pips (0.0001).
Forex order types are similar to equity market order types. A market order allows a forex trader the ability to acquire currency at the current exchange rate and a limit order permits the trader to stipulate a certain entry or exit price.
Now that you understand what is required to open a forex trading account, it is time to choose a brokerage to register with; review our list of recommended forex brokers here. A demo forex account is a great way to start trading with no risk. When you are ready, the brokerage will change your account to a “real” or live forex account. Most brokers have very minimal deposit requirements for real accounts; allowing a trader to start trading with real money and very limited risk.