Opening a Forex Trading Account (FAQ)

Submitted by currenciesfx on Mon, 04/18/2022 - 09:42
Opening a Forex Trading Account
Basic questions/answers regarding a new Forex trading account.

1) How do I start trading Forex?

It is highly recommended that you start trading Forex by opening a free demo account. A demo account can help you gain experience without any risk of losing your funds. All online brokers provide a free demo account. Afterward, when you are ready to trade for real money, you can start by opening a micro-lot account, that is suitable for beginners.
  • Demo and Practice accounts offer an excellent chance to evaluate the conditions of every Forex Broker without any cost or risk

2) What is the minimum deposit to open a real Forex trading account?

The minimum deposit usually ranges from $10 to $500.
  • simple trading accounts start as low as $10
  • ECN trading accounts start as low as $500
Some Forex brokers provide executive VIP accounts that usually require a minimum deposit of USD 10,000 or more. These accounts may offer exclusive market analysis from professional traders.

3) Which Forex broker is suitable for my needs?

Traders have different needs, and different needs create different brokerage choices. Let’s see some examples.

(i) A professional day-trader or a logarithmic trader needs an ECN broker with tight spreads, low slippage, and fast order execution

(ii) A carry-trader or a position-trader needs a Forex broker offering a wide Forex asset index and very competitive swap rates (overnight charges)

In both cases, all traders must choose among high-regulated Forex brokers offering a compensation scheme in case of insolvency.

4) How do I Choose a Forex Broker?

These are the key issues to keep in mind when choosing Forex brokers:

  • SAFETY OF FUNDS

(1) Is the Forex broker regulated by a trustable authority such as FCA UK, ASIC, or even CySEC?

(2) Is the Forex broker headquartered in a safe country?

(3) Does the Forex broker operates for more than 3 years in the market?

  • FUNDING & TRADING OPTIONS

(4) Are the available funding methods suitable to your needs (internet wallets, debit cards, etc.)?

(5) Are the available platforms suitable to your needs (WebTrader, MT4, MT5)?

(6) Is the available asset index suitable to your needs (Forex pairs, Metals, Indices, Crypto, etc.)?

  • TRADING COST

(7) What is the spread on liquid Forex assets such as EURUSD and GBPUSD?

(8) Are there any trading commissions?

5) Categories of trading fees when using the services of a Forex broker

Trading Spreads & Commissions

Some brokers charge only spreads, others charge spreads and trading commissions. There are also zero-spread accounts that charge only commissions.
-The spread is the difference between the ask and bid and it is measured in pips
-A pip means Percentage In Points and represents the 1/100th of 1%. For example, when the EUR/USD Ask/Bid is 1.1700/1.1701, then the difference is 1 pip (0.0001)
-Trading commissions are based on your volume and should be measured on a full-round lot basis. Usually, Forex brokers charge between $6 and $10 per full traded standard lot ($100,000)

SWAP Charges for Maintaining Positions Overnight

Positions that are kept overnight, become the subject of overnight (SWAP) rates. This can be positive or negative for your account's balance.

Other Fees

Other fees may include:
(i) Deposit / Withdrawal Fees, and
(ii) Maintenance / Inactive fess.

6) What is a Forex Lot?

When you open a new Forex trading account you have to select the size of the lot you will be trading. Lot is the smallest size in currency trading and all Forex pairs are traded in units:
  • MICRO LOT: (1,000 units) -Suitable for Forex beginners
  • MINI LOT (10,000 units) -Suitable for more advanced traders
  • STANDARD LOT (100,000 units) -Suitable for Forex professionals

7) What documents do I need to open a real Forex trading account?

Depending on the Forex Broker, the whole procedure of opening a real account may take from a couple of hours to a couple of days.
You will need:
-A proof of Identity (ID, Passport, or Driver's License)
-A recent proof of address (utility bill)
-A copy of your credit/debit card (if you plan to use one)

GENERAL INFORMATION AFTER YOU HAVE OPENED A FOREX TRADING ACCOUNT

8) When does the Forex market open/close?

The forex market operates 24/5 from Monday to Friday and includes 3 trading sessions: the US Session, the Tokyo Session, and the London Session. Between each of these 3 sessions, there is a period when two sessions are opened simultaneously.

i) The London and Tokyo markets are open at the same time between 3 am and 4 am (EST)

ii) The US and London Markets are open between 8 am and 12 pm (EST)

These common trading hours are called session overlaps and are characterized by high volatility and volume. The Forex overlaps offer the perfect conditions for intraday trading.

» Learn More

9) What is a Forex Trading Platform?

A Forex trading platform is the combination of software and hardware used to trade the Forex market. Widely used platforms include MetaTrader4 (MT4), MetaTrader5 (MT5), JForex, and cTrader.

  • All the above Forex trading platforms are 100% free and can be used on a demo account
  • All the above-mentioned trading platforms provide the ability to trade both manually and automatically
  • Forex beginners can use a WebTrader for their first steps

10) Which are the major Forex trading orders?

The order types when trading the Forex market include:
1. GTC Order (Good Till Cancelled)
2. Market Order
3. Limit-Entry Order
4. Stop-Loss Order
5. Stop-Entry Order
6. Limit Order
7. OCO Order (One Cancels Other)

11) Which are the most active currency pairs?

The most active and liquid Forex currency pairs are called the Forex majors and account for about 85% of the total Foreign Exchange market activity.

» EURUSD » GBPUSD » USD/JPY » USD/CAD » AUD/USD » USD/CHF
 
Opening a New Forex Trading Account FAQ
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