How to Open a Forex Trading Account
What Is Needed and Why
Forex trading is an exciting business surrounded by much online hype, but the average person can get started with trading forex if they learn a few pointers. The first thing that you'll need to do is decide on a broker to trade through. Choosing this brokerage can be easier after playing with different forex demo accounts. Look through a list of forex brokers. Once you've decided on a broker, you'll go through a standard sign-up process similar to opening a bank account.
Typical Requirements to Get Started
The first thing you'll do is set up an account with a forex broker. You'll need to provide a good deal of personal information to get your account set up, including the following:
- Phone number
- Account currency type
- A password for your trading account
- Date of birth
- Country of citizenship
- Social Security Number or Tax ID
- Employment status
You will also need to answer a few financial questions, such as:
- Annual income
- Net worth
- Trading experience
- Trading objectives
You might wonder why forex brokers want to know all of this information. The simple answer is to comply with the law. Forex has been a bit of a wild west industry since it went retail some time ago. So, regulations have been put in place to provide some degree of protection to account holders from various types of harm.
It's unlikely that you will find any broker willing to open your trading account without requiring these questions to be answered. If you do happen to find one that isn't asking many questions, you should be suspicious. If you are ever feeling wary about a particular broker, you can look them up through the National Futures Association to find out their status.
Forex Trading and Risk
During the final steps of opening your account, you will see risk disclosures. Please take these seriously. Forex is a difficult business for beginners. It tends to eat them for dinner if they aren't careful. There are more losers than winners on average. The broker is required to remind you of the forex risks.
Once you've turned in all of your information to be processed, the broker will verify it and typically ask you to send in some verification documents such as a government-issued ID, and maybe a utility statement to verify your name and address. The back and forth process can slow down the process by a day or two, but it's nothing to concern you.
Once your information is verified, you can fund your account and begin trading. One piece of advice that I like to give to all new traders is not to put any money in the account that you cannot afford to lose.
It seems like obvious advice, but some people start off feeling like they know more than they do, and take unnecessary risks. Start with a fair amount of money and trade small. Nothing can prepare you for the emotions that you feel when your money is truly at risk, so go slow in the beginning.
Forex Should Be Boring
Forex seems very exciting, but in reality, it should be boring and cut and dried. If you feel a great deal of anxiety when making trades, be careful. It's common to either get too wound up from your winning trades or become a destructive trader from your losing trades.
Learning to make trades using research and systematic logic will serve you much more than relying on emotion to guide your trading. Forex should feel like simple, methodical decision-making with precautionary steps in case of failure. While that might sound boring to you, you will survive much longer if you approach that market that way.
Keep Your Cool
If you find yourself feeling like you are making common forex mistakes and just generally feeling frustrated, stop trading, and review the basics again. Forex trading is one of those industries where occasionally you have to re-evaluate your methods to make sure you are achieving your goals. Try not to get too frustrated and keep your approach scientific and unemotional.