The decision to open a live trading account should follow the decision to trade with a specific Forex broker. We’ve covered here the multitude of aspects that make a good Forex broker, so the due diligence process should be one that leads to the right decision. Assuming those steps have been taken and the trader knows the Forex broker to trade with, the next thing to do is to open a trading account. Before even thinking of a live trading account, look at the trading platforms the broker offers. Most of the times brokers are offering in-built trading platforms together with the classical and most popular ones. MetaTrader is by far the most popular of them all, but also the c-Trader and JForex are increasingly popular lately. Then the way to access these trading platforms (and the trading account, obviously) is important as well. Traders should have access to the trading account via desktop log in, the web and via a smartphone app as well. The web access should be avoided as much as possible unless the Internet connection is a really good one. Web-based trading platform are famous for being slow and when the market is moving fast due to some economic event or news being released, the trading platform might play some tricks on you and the entry is not the one that is supposed to be. The broker is mandatory to offer you access to a demo account. Many traders are failing to trade on the demo account before opening a live one but this should be a mandatory condition. The demo account offers a vast array of information regarding the Forex broker. Things like the server time (GMT time or not), execution in volatile times (if there is any slippage when important economic data is released, like the Non-Farm Payrolls in the United States or an interest rate decision) and even the spreads charged, swaps, etc., should be first seen on a demo account and then on a live one. A Forex broker will always say that a demo account is good but it is not reflecting the realities of a live one. This is true to some extent, but it will make traders have a good idea about what trading with that broker is. Assuming all the information needed to trade on a live account is there, opening such an account is subject to some steps to be followed. This requires both patience and understanding, as well as trust that the broker will know what to do with a trader’s confidence.
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Steps to Open a Live Trading Account
Before opening a live trading account, the trader needs to know what kind of an account to open. The offering varies from broker to broker and even at the same broker there are multiple live accounts to choose from. Based on the minimum amount to be deposited, there can be different live trading accounts to be opened with different conditions. For example, on a big deposit, probably the account will be ECN (Electronic Communication Network) and while spreads are almost inexistent, commissions are a bit bigger than normal. However, no matter the trading account type, the following steps should be taken. Sometimes, depending on the service and technology used, some brokers skip some of these steps, but in principle, these are the ones that need to be followed.
Provide Personal Data and Relevant Trading Information
The first step is to provide personal data like date of birth and everything, together with relevant trading information. The trading information, even though it doesn’t seem to be relevant now, for the Forex broker is vital. Still, at this step, the broker will want to know what is the amount you want to fund your trading account. Together with the experience in trading the Forex market, this information allows the broker to categorize between different types of Forex traders: beginners, intermediate, experienced, etc. Depending on the way the brokerage house is organized and operates, the trader is being placed in a specific category and the broker will deal with that account according to its organization form. If it is a market maker or a hybrid between a market maker and an STP (Straight Through Processing), this information will allow to route the trader’s trades or not, or only part of them, to a third liquidity provider party.
Upload Relevant ID’s and Proof Address
It is important that the Forex broker knows exactly who you are and for that, some documents are needed. This can be either the passport or national ID card, together with proof of the physical address as it appears in the documents. This proof of address can be obtained from an electricity or phone bill, but also from a bank account opened in the trader’s name. All these documents can be scanned and uploaded on the broker’s website. The documents verification process may take some time, from few hours to a couple of days, but most of the time in maximum forty-eight hours the trading account should be open. If something goes wrong or you have the impression things are taking too long, there is always the customer service to be addressed. Ideally, the Forex broker should have a Live chat option available on the website for direct contact with its customers. If not, look for a proper response to any email contact to take up to twenty-four hours.
Funding the Trading Account
Funding should be a smooth process as there are multiple methods to be used. Starting with the classical credit cards and ending with electronic payment methods, anything can be used. The only thing that differs here is the time taken between the actual payment and the moment the amount is credited to the trading account. This varies based on the funding method used. The most time-consuming funding method is using a bank wire. If this is the case, expect up to three business days to pass before the money is visible in the trading account. This has nothing to do with the Forex broker, but mostly with the corresponding banks its bank/banks deals with. Other than that, payment can be processed instantly in case of using PayPal or credit cards or any other electronic payment method. Even Bitcoin is used nowadays to fund a trading account. Make sure you understand something: when it comes to the ways to fund a trading account, the Forex broker will strive to offer any funding method that exists to have as many clients coming in as possible.
Recommended Further Readings
- Forex Trading – Explaining the Concept
– What is forex trading, generalities about trading the currency market. - Why Trading Forex?
– Advantages and disadvantages of trading the currency market, what are trader’s expectations and what is a realistic approach to follow - What is a Forex Broker and Types of Brokerage houses
– Explaining what a Forex broker is and does, how the business should be organized, and how many types of Forex brokers exist. - Financial Products to Trade
– Different categories of financial products that a Forex Broker is offering for the retail clients, starting with the classical currency pairs, and continuing with commodities, CFD’s, indexes, etc. - Forex Trading Sessions and Their Importance
– Explaining the differences between the three Forex trading sessions, what are their importance, ranking, etc. - Forex vs. CFD – The differences between Contract for difference and Forex.
Other Educational Materials
- Forex trading and the WMR fix Evans MD.
- “Trading volumes and transaction costs in the foreign exchange market: evidence from daily dollar–yen spot data.” Hartmann, Philipp. Journal of Banking & Finance 23, no. 5 (1999): 801-824.
