Forex Account

By: EconomyWatch   Date: 23 July 2009

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A forex account is one that a trader has to maintain for trading in currencies. There are three types of forex accounts:

  • Demo or dummy accounts: This is the first step to active trading when a trader practices on simulations.

  • Mini accounts: These are fully operating and managed accounts with small funds. Retail forex traders start with mini accounts that allow trades with as low as $250.

  • Managed accounts: Large currency speculators use “managed accounts” as they trade in large amounts.

 

Demo and mini accounts give the retail trader a chance to learn execution methods and trade profitably.  

Forex Account: Parameters 

Before opening a forex account, it is best to check on the following parameters:

  • Whether the merchant is registered as a futures commission merchant.

  • Whether detailed forex updates are available on the website of the forex broker.

  • Verify sponsorship by a reputable institution so that your investments are secure.

  • Open the account with a broker who would provide information and technological advantages, such as charts and analysis reports.

 

How to Set Up a Forex Account

Choose a broker and set up an account according to your ability to take risk. Beginners in the forex trade prefer to keep the initial deposits low. Leverage allows traders to trade more than the balance in their forex account. The higher the leverage, the higher is the level of risk. Some brokers offer leverage as high as 400:1. However, high leverage could translate into high risk and high losses.

 

The other factors that one should also take into consideration before setting up a forex account include:

  • Margin agreement: The margin agreement with the brokerage company should allow you to trade when you want.

  • Commissions and other charges: There should be no hidden costs.

  • Options of currency pairs: The pair you want to trade in must be available.

 

Interact with friends and associates to take lessons from their experience with their brokers. Search on the Internet to find online brokerage firms and experts that help in setting up practice accounts. This would help you to learn forex terminology and strategies before "real" trading.

 


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