How to Open a Forex Trading Account
So after demo trading on at least three broker platforms, you’ve narrowed down your choice to a single forex broker?
After finding the right broker for you, you can open a forex trading account in three simple steps:
- Selecting an account type
- Activating your account
Why not? It’s all FREE! Make sure to try out and “kick the tires” of several different brokers to get a feel for the right one for you.
Choosing an Account Type
When you’re ready to open a live account, you have to choose which type of forex trading account you want: a personal account or a business (aka corporate) account.
In the past, when opening a forex trading account, you’d also have to choose whether you wanted to open a “standard” account, a “mini” account, or a “micro” account.
This is great for newbie and inexperienced traders who only have a small account of capital.
This provides you great flexibility, as you won’t have to trade bigger than you’re comfortable with.
Also, always, always, always remember: Always read the fine print.
Some brokers have a “managed account” option in their application forms. If you want the broker to trade your account for you, you can pick this.
But is this what you really want? After all, you didn’t read through the whole School of Pipsology just to have someone else trade for you!
Besides, opening a managed account requires a pretty big minimum deposit, normally $25,000 or higher. Also, the manager will also take a cut out of any profits.
Lastly, make sure you open a forex spot account and not a forwards or futures account.
You will have to submit paperwork in order to open an account and the forms will vary from broker to broker.
They are usually provided in PDF format and can be viewed and printed using Adobe Acrobat Reader program.
Also, make sure you know all the associated costs, like how much your banks charges for a bank wire transfer. You’d be surprised how much these actually costs, and they may actually take up a significant portion of your trading capital.
Once the broker has received all the necessary paperwork, you should receive an email with instructions on completing your account activation.
After these steps have been completed, you will receive a final email with your username, password, and instructions on how to fund your account.
So all that’s left is for you to login and start trading. Pretty easy huh?
Time to log in, pop open those charts, and start trading!
But wait just one minute!
We strongly advise you DEMO trade first. There’s no shame in demo trading – everyone has to start somewhere.
If you have been demo trading for at LEAST six months, then maybe you can dip your feet into live trading. Even then, we suggest you go in the shallow end and consider how much you want to risk.
Trading live is a different beast altogether. It’s like the difference between sparring against your kid brother (or sister) and fighting Manny Pacquiao.
If you start trading live without any demo trading experience, this is what usually happens:
But no matter how successful you were in demo trading, nothing can replace the feeling of having real money on the line.
And once you’ve started trading on a live account, never get too comfortable. Always remain vigilant and use proper risk management.
Steps To Open An Offshore Forex Account
Massive growth in the global foreign currency exchange (forex) markets has attracted the interest of traders and investors alike. With a plethora of currencies available and trade volumes running into the trillions of dollars, forex markets provide a convenient way to take advantage of inherent leverage and volatility, and to make handsome returns. Many traders have started opening offshore forex accounts in foreign jurisdictions because of favorable tax treatments in these locations and to overcome overly restrictive regulations in their own country (like the Foreign Account Tax Compliance Act or FATCA in the United States).
Let us look at how a US-based investor can open an offshore forex account:
Pick a Forex Broker
The first step towards opening an offshore forex account is selecting a broker. There are numerous sites which rate the best international forex brokers such as FX Market Leaders and Forex Brokers Review. Some things to keep in mind while selecting a broker include fees and commissions, the minimum balance required to operate and fund the account, capabilities of customer service staff, etc. It is important to ensure that the broker meets all requirements and standards set by Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA) and complies with the local offshore laws. This will help avoid running into regulatory issues later on.
Opening and Operating the Forex Account
The documentation involved in opening an offshore forex account is relatively straightforward these days, with minor variations per the regulations of the offshore country. Most brokerages will make their first-time customers fill out a terms and conditions agreement and a customer trading form. A notarized passport copy and other forms of identification (e.g. bank statements, credit card statements, utility bills, etc.) confirming the address of the applicant are generally required. Some brokers provide the flexibility of operating the forex account with minimum amount of as little as $100.
Alternatives for Forex Investing
For investors with a sizeable amount to invest ($100,000), opening an offshore international business corporation (IBC) or an offshore trust might be a more profitable option. An IBC is one of the most flexible and safe methods for offshore forex investing. Establishing an IBC is a little costly upfront (
$1500), but it frees the investor from onerous reporting requirements and the costs can be recouped early through tax savings. It also allows an investor to trade forex any way he or she wishes.
Disclosures and Legal Compliance
It is of utmost importance to check whether the selected broker and the types of forex trades the investor intends to carry out in the chosen jurisdiction are all in compliance with the legal and regulatory bodies of the home country. For US investors, the Treasury’s Foreign Account Tax Compliance Act (FATCA) governs investing and banking overseas. According to FATCA, foreign financial institutions (FFIs) are required to provide information about US citizens invested in offshore accounts outside the US to the Internal Revenue Service (IRS). FATCA-compliant FFIs can be viewed here: FATCA FFIs.
The Bottom Line
With the ongoing integration of the global financial markets, opening an offshore forex account is not a daunting task anymore. Retail investors should keep in mind their relative information disadvantage and the inherent volatility in the forex market which may lead to huge losses. If opting for an offshore account, investors should aim to thoroughly understand the legal, tax, and regulatory implications both in their home country and in the offshore location.
Learn how to trade forex and unleash a world of potential opportunity
Explore new ways to optimize your trading strategy with currencies
If you’re looking for a highly liquid trading arena that allows you to speculate on a nearly 24/6 currency market, forex currency trading may be right for you. Trading in forex should be limited to risk capital, and the off exchange foreign currency market contains some unique risks, but for sophisticated traders it can provide the opportunity to profit from a very active global market.
Explore the information and resources below to increase your understanding of how to trade forex. If you have questions along the way, contact one of our forex specialists available anytime via chat, by phone 866-839-1100, or by email 24/7.
Understanding the Basics
It’s a global market for exchanging currency between nations, and for individual speculators or traders. Like its name implies, the retail off exchange forex market is not conducted on an exchange, which means there is no physical location where all currencies trade.
An important and essential concept to understand with forex is that it’s traded in pairs. This means you are buying and selling a currency at the same time. For example, you enter into a European euro versus the U.S. dollar trade, or EUR/USD. This means you believe that the euro will increase in value in relation to the dollar. Conversely, if the euro goes down with respect to the dollar, you could lose your entire deposit, or even more. If the euro goes go up and you’d like to take your profits, you would “unwind” that position by selling the euro and buying the dollar. That’s a very simple example, but should give you a general idea of how forex works.
Some things to consider before trading forex:
Leverage: Control a large investment with a relatively small amount of money. This allows for strong potential returns, but you should be aware that it can also result in significant losses.
Nearly 24/6 Market: Be responsive to market conditions and economic events knowing that you can trade almost 24 hours per day, 6 days per week – from market open on Sunday to market close on Friday.
Liquidity: Forex is a very active market with an extraordinary amount of trading, especially in the biggest currencies. Trading some of the more obscure pairs may present liquidity concerns.
Trading costs: Forex trading doesn't usually require payment of an exchange or license fee, but you will be required to deposit margin for the position. With a TD Ameritrade account, you have the option of trading either non-commission FX pairs or commission based FX pairs.
Open Your Account
To start trading forex at TD Ameritrade, you’ll need to open a standard account. The Standard account can either be an individual or joint account. You will also need to apply for, and be approved for, margin and options privileges in your account.
Choosing a Trading Platform
With a TD Ameritrade account, you’ll have access to thinkorswim, a powerful trading platform where you can trade forex, as well as other investments. This feature-packed trading platform lets you monitor the forex markets, plan your strategy, and implement it in one convenient, easy-to-use, and integrated place. One of the unique features of thinkorswim is custom forex pairing.
In addition, TD Ameritrade has mobile trading technology, allowing you to not only monitor and manage your forex position, but trade currencies right from your smartphone, mobile device, or Presented by TD Ameritrade" data-video-duration="00:29" data-video-level="New Investor" data-video-title="iPad">iPad.
Developing a Trading Strategy
For any trader, developing and sticking to a strategy that works for them is crucial. Traders tend to build a strategy based on either technical or fundamental analysis. Technical analysis is focused on statistics generated by market activity, such as past prices, volume, and many other variables. Charting and other similar technologies are used. Fundamental analysis focuses on measuring an investment’s value based on economic, financial, and Federal Reserve data. Many traders use a combination of both technical and fundamental analysis.
The thinkorswim, trading platform offers technical analysis and third-party fundamental research and commentary, as well as many idea generation tools. You can also use paperMoney® to practice your trading strategy without risking capital. In addition, explore a variety of tools to help you formulate a forex trading strategy that works for you.
Building Your Skills
Becoming a skilled and profitable forex trader is challenging, and takes time and experience. With thinkorswim you’ll have access to a nearly endless amount of features and capabilities that will help build your knowledge and forex trading prowess. You can also contact a TD Ameritrade forex specialist anytime via chat, by phone 866-839-1100 or by email 24/7. Explore our educational and research resources too.
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Market volatility, volume and system availability may delay account access and trade executions.
Educational resources are provided for general information purposes only and should not be considered an individualized recommendation or advice.
Forex trading involves leverage, carries a high level of risk and is not suitable for all investors. Please read the Forex Risk Disclosure prior to trading forex products.
Forex accounts are not protected by the Securities Investor Protection Corporation (SIPC).
Forex trading services provided by TD Ameritrade Futures & Forex LLC. Trading privileges subject to review and approval. Not all clients will qualify. Forex accounts are not available to residents of Ohio or Arizona.
International investments involve special risks, including currency fluctuations and political and economic instability.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
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