Getting started in trading forex can be incredibly daunting because new traders often get overwhelmed with the entire process, but little do they know that it's no different from opening a bank account. So, in this article, we teach you everything you need to know about how to open a forex trading account so that you can begin your journey as a forex trader.
What Do You Need to Open a Forex Account?
Choosing a forex broker is essential for opening a forex trading account and listed below are just some of the important information you need to provide them to get your account set up:
Additionally, there are a few financial questions you need to answer including:
What Does a Forex Broker Do?
A Forex broker gives you access to the financial markets. Brokers provide a platform that allows you to buy and sell foreign currencies.
Most of them will even help you gain a comprehensive understanding of trading.
Forex brokers will offer you webinars, trading tools, charting applications, educational videos, and other helpful resources.
Do You Need a Forex Broker?
Perhaps the number one reason why brokers are your best choice if you want to trade currencies is that the cost of their services is far too little in contrast to other possible alternatives.
Brokers typically don't charge a commission per trade but instead take just a tiny difference between the buy and sell quotes as profit, usually from 0.5 to 1 pip (0.00005 or 0.0001).
It is also the easiest way to transact in the forex market without straining on the physical exchange of currencies. Apart from this, brokers provide leverage, which allows you to magnify what you can earn per transaction.
Finding the Right Broker
Finding the right broker means choosing the one that provides broad research and education services.
It would also help if you steer clear from companies with questionable operations. In other words, make sure they are regulated. In the U.S., brokers must be officially regulated by the Commodity Futures Trading Commission (CFTC). Or, they can be also governed by the National Futures Association (NFA). In the U.K., the Financial Conduct Authority (FCA) monitors such firms.
Can You Trade Forex Without a Broker?
Yes. One way to do this is to deal directly with a bank. This means that you trade with physical currencies. You have to go to your bank and exchange your dollars for euros. When the euro goes up, you have to return to your bank and exchange your euros again for dollars. That's how the physical exchange of currencies goes.
However, if you use this option, get ready for huge fees and small profits. Why? Well, since you're not trading with a broker whose technology and access to the interbank market allow you to get competitive rates and leverage, you'll have to transact with the actual amount of money you own at the least favorable rates offered by your bank.
So, unless you have hundreds of thousands of dollars in hand, you'll likely generate just a trifling sum per trade. In this case, the services of a brokerage company would still be the most cost-effective solution to trade foreign currencies.
Procedures for Opening an Account
Opening a forex trading account is straightforward and below are the exact steps you can follow to get started:
How Much Money Do You Need to Start Trading?
Most traders on a low budget start opening a forex trading account from $500 to $1,000. This amount, however, will restrict you from doing day trading.
If you want to stay in your stature for days or weeks, you can venture into swing-trading.
What if you don’t have hundreds of dollars to open a forex trading account? Well, it’s about time to debunk the myth that you need to invest a huge amount to start trading. The truth is you can trade as little as $5 with some brokers.
Our Top Choices for the Best Forex Brokers
Now, it can be challenging to find the best broker to open an account with because there are thousands of firms to choose from. So, to make it easier for you, we've reviewed several forex brokers and narrowed down our top choices, which you will see from the table below.
Yes, you can begin trading with forex at $10. Actually, you can even start with just $5.
You need a bank account for depositing and withdrawing funds from your trading account.
No, you don’t need any license to trade forex. Forex is available to retail traders with valid accounts from well-regulated brokers.
No. Forex trading doesn’t require you to recruit or sell any illicit product. You participate in the currency market in order to profit from the fluctuations of foreign currency exchange prices.
Before you get started in forex trading, find a reliable and trustworthy Forex broker. Doing so, enables you to have access to the forex trading industry.