Forex trading has become a trend and is the biggest market for exchanging different currencies. An estimate of 14 million people are trading forex and the market has grown from 1.2 trillion in the 1990s to 6 trillion in 2021. For anyone to trade forex, they have to open a forex account with any of the brokers.
A forex account is an account opened with a broker, where you deposit money and the money gets exchanged to different currencies. A forex broker is a company or organization that links traders with the forex market.
Trading currency means that you exchange different currencies by buying and selling to making money.
Types of forex accounts
There are two types of forex accounts that can be created. The real forex and the demo account.
A demo account is created like a real account, you can trade using this account but the funds in this account are in virtual currency. You cannot use your funds in a demo account. It is created for beginner traders
A demo account allows you to be familiar with how trading works, learn how to make analyses. It allows you to understand how to trade and when to trade. It is conducive to learning because no risk is involved.
A real account is where you can trade using your real funds. Real accounts allow you to deposit your funds and withdraw them. A real account gives you the experience with trading unlike how the demo account is.
A real account exposes you to losses and profits which trains you on how to make strategies and choices for trading. A real account can come in different varieties depending on the amount you want to start trading with.
If you want to start investing with a large amount, you can choose a premium plan or a professional plan. A standard plan that gives you access to certain privileges that a mini or micro account will not be able to get.
There are also managed accounts that give the brokers access to trade on your behalf with your consent.
Before getting to real trading, it is advisable to start with a demo account to get enough practice.
How do you open a forex account?
When you want to open a forex account choose a seasoned and licensed broker who is regulated and has experience with trading for years. A broker is someone you have to trust with protecting your funds.
Some questions to ask your broker before choosing to partner with them are
Which type of support and service do you offer?
How many analysis and trading tools do you offer?
What are the commission fees and charges?
What is the smallest deposit needed to start trading?
As of now, there are many brokers, and some well-known and reliable ones are Roboforex, Markets.com, vantage fx. Once you choose a broker, you will need some details to fill to create your account. You need to have your
Date of birth
Tax ID or any security number
Once you have filled in these details, the broker has to know some financial information from you. They include your employment status, your background with trading, what goals do you want to meet when trading.
These questions are there to help the brokers secure your account against any risks, and also to help them know if you can be able to manage any loss. These questions also are to protect the broker from any legal violations that could happen.
After registering you will see the terms and conditions to adhere to and the risk disclosure you have to read and understand. You need to know the risk you are exposing yourself because of the nature of the forex market.
When all the information has been filled in, verify your identity and your accounts. Send your government identification card, your credit card statement to verify your location and address.
Make sure to add your bank account details when filling in your profile so that you can deposit and withdraw funds during trading.
The time it takes to verify a forex account with a broker varies. Some brokers take days and others take hours. You can log in after the verification is over and make a deposit according to the bank or credit card you listed.
The deposit is the final stage of creating your account. After this, you can inquire about any trading tips you need to start trading. The broker has all the information that you need when trading so it should be utilized.
How much do you need to open a forex account?
Before you decide to start trading forex, you need to identify how much you can invest to trade. This decision will influence the type of broker you want to trade with. Different brokers give different types of minimum deposits needed to start trading.
The least investment is also determined by your objectives for trading forex. If you plan to trade forex regularly then you need a higher investment than a person who trades once in a while.
Trading forex requires a long-term commitment and not a swing by. If you want to trade professionally, having a good investment is necessary. So you may need a good investment of around $5000.
When following the 1% risk rule it is easier to use $5000 where the only risk is %1 which is $50 than $100 to give you $1. When you calculate the pip value of $1 the pip movement can only average a few dollars profit in a day. If you use $5000 you can make around $590-$100 in a day which is fair income.
This kind of investment gives you the flexibility to make big moves and make better profits. This is rather than a small trade that gives smaller profits and a larger risk of loss.
It is better to make investments that have a higher profit than risk and can allow you to invest or make a big trade.
Does forex have a monthly fee?
All forex brokers have different fee rates. Some brokers are honest and transparent with their clients about the fees they charge for trading.
There are different fees charged by brokers. There is the
Spreads are the difference between the bid and the asking price depending on the pair currency.
Commissions are charged on different assets and equity trades. The broker lists the assets that have commission.
Storage fees some brokers charge fees for holding your assets for you. Others charge fees for selling and holding a premium or a standard account.
Swap rates emerge from the interest rates of the difference of currency pairs. Brokers give a list of the charges that apply.
Other costs include the withdrawal charges and the redundant fee for inactive accounts.