Choosing the right forex account to conduct your foreign currency exchange trading activities seems relatively easy on the surface. Unfortunately, when you look a little deeper, you’ll soon find that it’s important to choose the right account to suit you, or you could face problems later.
You’ll need a forex trading account if you intend to generate profits from trading foreign currencies, and an online forex account can give you a significant amount of freedom. When you trade online, you have the ability to place trades at any time of the day or night from anywhere in the world with an internet connection.
Here are some other considerations to think about before signing up for your forex account.
Most forex brokers don’t charge any trading fees or commissions. Instead, they charge a ‘spread’. This is the difference between the bid and asks price. They add the spread onto the price of the trade and keep this as their fee for your trade. Spreads can vary greatly between brokers.
It’s important to understand how these things are calculated, as you may find that the bid/ask price represents a spread that is higher than other brokers may charge and could impact your profitability.
You could also find that the type of forex trading account or online forex account you choose can impact the trading costs associated with trading.
This means some brokers will charge a much lower spread for high-volume traders and charge a higher spread for those traders who place trades less frequently.
Even though you might think one single pip (or point of currency value) might not look like much, consider trading on a 5 pip spread instead of a 4 pip spread. One tiny pip worth of currency value looks so incredibly small. Yet it still could represent 25% of your overall trading costs.
When you multiply this amount by the amount of high leverage available through most forex trading accounts, those tiny pips suddenly multiply into vast amounts of money. This is especially true with leverage available of ratios up to 200:1.
Before signing up for a forex trading account, be sure you have access to a demo version. This can allow you to see how the spreads are calculated, how the platform works, and what kind of analytical information is available on your online forex account.
You also have the opportunity to place trades within your demo account that can show you how quickly each trade is facilitated and executed. You’ll be more aware that a particular forex account is the right one for you before you commit any of your own money into the deals.
There are plenty of forex accounts that accept standard-sized trades, but if you’re a little more cautious about how much of your own money you want to spend, you might consider opting for a micro trading account or even a mini trading account.
These can allow you to place trades for significantly smaller amounts, which can limit the amount of capital you expose during each trade. You will also find that the amount of deposit needed to begin trading is also substantially lower, ranging from just $25 to get started up to around $200.
These types of online forex accounts can be an excellent way to get a feel for forex trading,