A foreign exchange account, or Forex account, is used to keep currencies and trade them. You usually open an account, deposit money denominated in your local currency, and then buy and sell.
Of course, your aim is to make money from your trades. Unfortunately, most Forex traders lose money; a Forex trading account has an average duration of just about four months. It doesn’t say, as some critics have claimed, that Forex is fraud, but Forex scams do abound.
How to Open a Forex Trading Account
Opening a Forex account is as easy as opening a bank account. You do, of course, need to locate a Forex broker first. All Forex retail trading goes through and is handled by a brokerage. It could be a specialist Forex broker or the same brokerage you use to buy and transact in the stock market.
You will need to fill in a short questionnaire about your financial experience and plans to trade. You’ll also have to have an ID, and your Forex account institution needs the minimum deposit.
By the way, many Forex brokers are going to take your credit or debit card instead of cash, so you don’t really have to deposit any money at all — not that’s a good idea. Debt on a credit card brings high interest rates.
Forex Brokers
One of the aspects of currency trading that makes it more volatile than stock-market trading is that the entire currency trading industry is either marginally regulated or not regulated at all with respect to certain trades.
A result of this is that you may be defrauded unless you carefully look into the credibility of the Forex broker that you pick. There are two ways to stop that.
The first is simply to fully avoid specialist Forex traders and trade with a general stock exchange operating in the U.S., and therefore controlled by the U.S. Commission on Securities and Exchanges (SEC).
The other way to avoid unintentionally connecting to a fraudulent broker is by taking very close note of a professional Forex brokerage. Please open an account with an American broker with a National Futures Association membership.
Verify commission rates before finalizing your search. Transaction costs are an important factor in company profitability.
