Warming Up and Opening an Account

How do I set up an account?

Before you set up a trading account to trade forex, you first need to choose which forex broker best suits your needs and trading style. There are mainly two types of brokers:

1. ECN (Electronic Communication Network) and
2. Market-Maker

It is very important to make sure that the broker is situated in a country where their activities can be monitored by a regulatory agency.

Experiment first with virtual money

The best way to learn how to trade forex and to see if it is suitable for you is to trade it real-time, but with a demo account initially. Demo accounts can be opened for free with certain brokers; no real money is deposited in this type of account. You can experiment real-time trading with different currency pairs using various trading strategies without losing any real money – it is a good way to build up some confidence. You can get a sense of how it feels to have a profit or a loss, even though the intensity of these emotions will be of a different level when trading with real money. It is the best way for new traders to dip their toes in the water.

How much money is needed to start?

The amount of trading capital needed is relative. After getting a feel with a demo account, you can start with real money. The first type of account you can open is a mini account which requires a minimum of just a few hundred US dollars (some brokers even allow you to open a mini account with just US$100). However, don’t expect to grow rich on such a small amount. For standard-sized accounts, the general minimum is around a few thousand US dollars.

Thinking of putting your life savings into a trading account?

Don’t. Only trade with money you can afford to lose. Make sure that even if you lose all of your trading capital, your lifestyle won’t be affected.

If you lose a large amount, you may never want to trade again. Whereas if you lose virtual money in a demo account, or a small amount in a mini account, it may be easier to pick yourself back up after losses – both emotionally and financially.

Currency codes

Each currency is represented by a three-letter currency code according to the International Organisation for Standardisation (ISO). The ISO 4217 code list defines different currencies, and is the standard used in the banking industry and in businesses all around the world. See below for some of the more common currency codes.

The first two letters of the currency code are based on the two letters of the country code according to the ISO 3166-1 alpha-2 (they are also often used to denote a country’s domain on the Internet) and the third letter is usually the initial of the currency itself. For example, Canada’s currency code is CAD – CA for Canada and D for dollar.

Tweet