Starting Your Own Forex Account

Does the world of currency exchange sound appealing to you?  You may want to try your hand at it yourself, but first make sure you do your homework.  Learn the lingo of the FX world first and move on from there.  In my previous articles I define enough of the key words and phrases that you should be all set in this respect.  You must also have a firm grasp on how margin accounts work and the risks involved with leverage.  Even if you are all ready familiar with trading stocks (and if you aren’t, don’t worry.  This is a good place to start!), the definition of margin and how it is used is slightly different.  But one similarity between stocks and currency remains key: you need access to money that is not immediately required for your cost of living.  Do not invest money that you will need!  There should be no emotional attachment to your investments.  Risking money that is vital to your welfare will only cloud your judgment and prevent you from making good trading decisions.

So you’ve done your homework.  You know all about the FX market, you’ve saved your money, and you’re ready to start investing.  Now you need to select the type of account you want to open.  These usually vary from broker to broker and are dependent on how much your initial deposit is.  You can also get an account that, for a fee, your broker will make virtually every trading decision for you.  For the astute trader, this is unnecessary.  In my opinion, it also takes the fun out of investing.  I’d much rather do the footwork myself and make my own decisions based upon my studies.  Earning money on your own initiative is so much more rewarding.

You must also choose what type trading you will be doing: Spot or Future.  It is probably best to avoid Futures trading until you have gained a good amount of experience in the market.  You also need a much more sizable bankroll to fund Futures trades.  Spot trading is more conducive to the beginning trader since it offers immediate results and is not as speculative.  If you feel uncomfortable in a position, it is much easier to close it than if you were under contract.

The hardest decision for the beginner will be selecting a broker.  There are scores of them out there; you want the one that best suits your needs as a trader.  For instance, if you have a small budget, you don’t want to be involved with a trader that specializes in huge corporate accounts.  Again, you must do your homework in this area.  Don’t be tempted to go with the first broker that looks appealing.  Search around, there are plenty of brokers out there that will give you what you want, you just have to find them.

Once you have chosen a broker and registered your account with them, it is pretty easy to start trading.  Usually, you are given software or other information on how to actually conduct a trade.  Become as familiar as possible with these programs before actually embarking on your investing journey.  You don’t want to make a costly mistake just because you were unfamiliar with the trading platform.

Now you’re ready.  Remember to start small and document your trading as closely as possible.  You will make mistakes starting out; not only do you want them to be as small as possible, you want to learn from them as well.  Documentation in a trading journal aids in this process.  You should include basic information such as base/quote prices, the date, and amounts invested.  On top of this, you will want to include more complex data such as the broad market conditions during the time period surrounding the trade.  You will even want to record your comments and thoughts prior to engaging in the trade.  The more you record, the better.  This will not only capture the fundamentals of the trade, it will give you a chance to reflect on the psychology that went into the trade.