How to Set Up a Forex Trading Account
Learn how to set up a forex accounts and why it's different from a bank account.

Contents

    Forex trading has become an exciting new financial opportunity for beginners looking to invest.

    As one of the largest financial markets today, its popularity rose because of its potential for high gains and fast returns.

    Another reason for its growing popularity is that it allows beginners to compete with large hedge funds and banks.

    However, this depends on what type of forex trading account you have.

    If you are looking to start trading in forex, this article explains everything you need to know before setting up your forex trading account.

    What is forex trading?

    The foreign exchange is referred to as ‘forex’.

    It is a global marketplace for speculating different currency prices to make a potential profit.

    You exchange currencies in pairs, so you speculate whether one currency will rise or fall in value against the other currency by exchanging one currency for another. 

    Forex trading works like any other transaction where you are buying one asset using a currency.

    With forex, you use one currency to buy another.

    If you are looking to buy a currency, you expect the price to rise in the future to buy it at a lower price and then sell it once its price increases.

    However, if you want to sell a currency, you expect the price to fall, so you want to sell it at a higher price than when its value is likely to fall.

    What is a forex broker?

    A foreign exchange broker is a financial service provider through whom you can buy and sell currency.

    You can only open a forex account with a forex broker who acts as an intermediary between traders and the interbank, the global market for trading foreign currency.

    What should you consider when opening an account?

    When opening a forex account, you have multiple different trading accounts to choose from.

    This makes your decision extremely important as each account has different benefits and limitations.

    Therefore, before you open your account, you need to consider the following questions based on your skill, knowledge, and experience in forex trading.

    • How much do you want to deposit?
    • How willing are you to take risks? 
    • Do you have access to advanced trading tools?
    • How much time do you have to trade daily?

    Firstly, depending on how much you are willing to deposit, your options for forex trading accounts will open up.

    Secondly, when it comes to taking risks, you may be more inclined towards a micro account.

    However, if you like to take big risks, a standard account may be more your style.

    Lastly, the account you choose will depend on how seriously you take forex trading, as some brokers only reserve high-quality trading tools for professional clients.

    If forex trading is something, you can invest a lot of time and effort to have access to better insights through such tools. 

    The Different Types of Forex Accounts

    There are three main types of trading accounts that you can choose from depending on how much you want to trade, your appetite for risk and the size of your investments.

    Each account has its respective requirements.

    Therefore, you need to take the time out and research each one before choosing the best one for you.

    Mini or Micro Accounts

    A forex mini or micro account is one with a small cap.

    This allows beginner traders to enter the market using smaller trading quantities which ultimately lower the funds at risk and reduce the chances of any potential losses.

    With a mini account, deposits can be as low as $20, $50, or $100.

    However, as it is a mini account, restrictions are placed on the size of trades as it helps them better control any risks.

    Compared to a standard account where traders can enter into contract sizes of 100,000 units of a standard lot, a mini account only allows 10,000 base currency units.

    The benefit of opening a mini or a micro forex account is a low-risk level compared to other means of forex trading.

    This enables inexperienced traders to experiment and test new strategies without risking their capital.

    Another benefit is the low capital requirement and flexibility mini, and micro-accounts offer.

    With deposits as low as $20, opening an account and managing your risk level is extremely easy.

    However, due to the risk level being so low, the rewards are also quite low.

    Therefore, this type of account is suited for beginners looking to understand forex trading and develop their own strategies before investing more time and money.

    Standard Accounts

    Standard account can be referred to as many different names, including ‘Classic’,’ Intermediate’, ‘Premium’ or ‘Gold’ accounts.

    This is quite misleading for someone just starting to trade in forex, as standard accounts are simply the regular accounts that a broker offers.

    There is usually a minimum deposit limit set between $100-$500 where you can trade mini-lots, and in some cases, some standard accounts will allow you to trade standard lots.

    This account gives the trader access to standard lots of currency worth $100,000 each. 

    The biggest advantage for standard accounts is that you get better service as brokers provide better perks for individual investors who have standard accounts as they will have the adequate up-front capital to trade full lots.

    However, most brokers do require standard account holders to have a minimum balance or capital requirement.

    Therefore, standard accounts are usually recommended for experienced traders.

    Managed Accounts

    Managed forex accounts are those where you put in your capital, but the decisions on buying and selling are up to a manager.

    You simply have to set your objectives and goals, and the managers work to meet them.

    Moreover, managed forex trading accounts can be divided into two categories; individual accounts and pooled funds.

    A pooled funds managed account is where your money is placed in a mutual fund with other investors, and all profits are equally shared.

    Such accounts have a higher risk to reward ratio and would be suitable for someone looking to make money fast.

    However, an individual managed account is managed by a broker who decides for each investor instead of a pool of investors.

    The benefits of a managed account are quite clear as you get more security and expert decision making from your account is managed by a professional forex broker.

    However, such accounts require a high investment alongside account managers keeping commission in the form of an account maintenance fee each month.

    Lastly, flexibility is quite limited as the account manager makes all the decisions, and you may not be able to make a direct decision if you see the market moving.

    VIP/Professional Accounts

    A VIP forex trading account is for professional traders classified as VIPs who are financially stable enough and can afford to deposit up to $10,000 as capital.

    If you are a VIP trader, you also get to enjoy a lot more benefits, such as access to prepaid debit cards, technical market analysis tools, travel packages, to name a few.

    Such accounts are intended to provide a richer trading environment for experienced traders who can make large investments ranging from thousands to millions of dollars.

    Other Types Of Forex Accounts

    Demo Accounts

    A demo account is a free training account that many brokers provide.

    As a beginner trader using a demo account, you can experiment with virtual currency in real market conditions.

    This is your chance to put your theoretical knowledge to practice and experimenting with different strategies, so you have a better idea and more experience when you do the same with your own money and investment.

    There is absolutely no risk involved when using a demo account, making it a great learning opportunity for beginners.

    It is recommended to only use a demo account for a short period of time, as once you have a better idea of forex trading, you should switch to an actual account with real money.

    Swap-free accounts

    A ‘swap’ is the commission or interest a broker charges when a trader decides to keep their position overnight in forex trading.

    Such accounts offer interest-free forex trading with no rollover or any premiums.

    While this means a trader will not have to pay a swap fee, it also means that they will not receive one.

    Opening A Forex Trading Account

    Step 1: Collecting Information Needed To Open A Forex Account

    You will need to provide the following information to complete an online application form and open a forex trading account.

    • Your name, email, address, and phone number.
    • Your account currency type
    • A password for your trading account
    • Your data of birth and country of citizenship
    • Your employment status, social security number, or tax ID.
    • Your annual income, net worth, trading experience, and trading objectives.

    Step 2: Visiting a Broker’s Website & Completing an Application

    Once you visit a broker’s website, you have to review the different accounts available to open.

    Once you’ve made your decision, depending on how much you are willing to invest both in terms of your time and money, you can start your application form.

    Once you’ve completed your online application and registration process, you will be given a username and password to access your account and log into the brokerage’s client portal.

    Step 3: Arranging For The Transfer of Funds

    The last step is to arrange to transfer funds from your bank account to your forex trading account.

    You can arrange for this transfer through your credit or debit card or an electronic bank transfer.

    However, make sure to check if you have to pay interest depending on your chosen payment method.

    Once your account is funded, you can start your forex trading journey!

    Final Words

    The type of forex account you choose completely depends on your interests, objectives and the amount of time and money you can invest into forex trading at that particular point in time.

    While the application process itself is extremely simple, deciding which account to open takes the most time.

    Therefore, you need to understand the different types of accounts available to open before jumping into any online applications.

    As a business, FX accounts are more than just speculative trading account. They are key to cross-border payments.

    Open a business account with Statrys today and you'll have the option of using Statry's FX account features to make multi-currency payments easily and entirely online.

    85% of our customers open their account in less than 48 hours.

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