Opening a live account in Forex can be a tedious task for beginners especially without a guide for the first time. The steps required to open a demo account is quite easy due to the virtual nature of the account.
Most brokers adopt the same principle, and requirements for opening live accounts, except for some who request additional documents due to their country’s financial regulations, which grants more verification of the applicant’s identity for security purpose.
Before we go further let’s consider an important checklist below.
CHECKLIST – What you need to verify before considering opening an account with a broker.
- Is my country among the eligible countries allowed to open a Forex account with the broker?
- Does the broker allow payment options available in my country’s financial institution? Can I make withdrawals with the withdrawal options being adopted by the broker?
- What are the fees required to deposit and withdraw from the broker and its custodian bank?
The checklist above is the first thing to consider before deciding to open a live account with a broker.
For now, we’ll assume you must have decided on the broker you intend to open a live account with.
The steps below can be applied to other Forex brokers.
Step 1. What kind of account should I open?
This is an important aspect you need to know before opening a live account. There are three major types of Forex accounts available by all brokers. I’ll explain to them to help you know which account is appropriate for you.
1. Micro Account : This type of account is best for beginners in Forex. It is ideal for participants who have low capital to trade Forex. Very little risk is involved due to the micro nature of the account. The common leverage size is about 400: 1, with a minimum of $ 100 opening balance.
2. Standard account : This account is intended for traders with significant high capital than the micro account. Experience in Forex is a criteria to successfully trade with an account of this nature. The leverage involved here has a higher impact than the micro account. Most brokers usually request a minimum of $ 2,000 or $ 5,000 or as much as $ 10,000 to $ 50,000 to open a standard account. The common leverage size is about 100: 1 with 100,000 trade size.
3. Mini account : A mini account is an account appropriate for both beginners and experts in Forex. It has the capacity to control one tenth of a standard account (ie $ 10,000). It has a common leverage size of 200: 1 with $ 500 or higher opening balance and 10,000 trade size.
It is important to note that the lot size varies according to each Forex broker. Apart from these common types of account, there are proprietary Forex account designed with unique features and specific services.
Step 2: The Required Documents
It is very important to know the broker’s required documents. It would be a waste of time to fill the live account form and get to the documentation stage only to learn that a particular document cannot be produced or is not available in your locality or country.
The basic documentation most brokers would require are:
Proof of legal identification . Your national driver’s license or international passport are the best for this.
Proof of legal address . House rent receipts, and utility bills stating your house address are acceptable.
Bank statement . Not all brokers require this except for further verification purpose or alternatives.
Utility Bill Receipt . Some brokers require this to further verify your legal identity and proof of social responsibility.
Step 3: The Live Account Form (Individual Account)
The following details are usually required to be filled in the live account form online or offline.
Personal Information : Ensure that the information you state here matches with the details in your bank account. Information required here are the applicable Title, First Name, Middle Name, Last Name, Date of Birth, etc.
Contact Information : Your Email Address, Country, Phone Number, City, Street Name, Postal Zip Code, etc
Investor Information : Currency type, net worth outside your personal income, your annual income, employment status, your industry, etc Brokers require this information to advise you and indemnify themselves in case you do not meet the financial requirements to invest in Forex.
Trading knowledge : Your experience level in Forex, CFDs, Options, Futures, Stocks, etc Brokers use this information for advisory purpose.
You may be required to download a form containing risk disclaimer notice and other conditions of service or agreements for your signatory. After signing the form, scan it and email it back to the broker. This form serves as a consent form by the applicable indemnifying the broker.
All other documents should be scanned and sent to the broker as well. The broker will screen your application, and the documents submitted. You will be informed if your application is successful or not. If your application is successful, a confirmation message voting details of how to fund your account would be sent to you.
DEPOSITING FUNDS INTO THE LIVE ACCOUNT
The steps here vary from country to country but the principles are the same. The steps can be applied to other banks in other countries. We’ll assume you have already downloaded the trading platform.
The trading platform before now should be on a demo account or blank if it’s a new one. You do not need to download another trading platform for a live account if you already have a demo account from the broker. When your application gets approved, you will be given details of the live server ip address and login details.
Step 4: Identify which deposit option is preferred for you.
Each deposit option comes with its attendant fees and hurdles. Some options are faster, some are costlier than others, while some are more secure. The credit card option is currently being negotiated by some financial regulatory agencies as a deposit option. I personally will not recommend it. The bank wire option still remains the best and secured option to deposit and withdraw funds from your Forex account.
Step 5: Open a foreign account (domiciliary account)
This is required for wire transfer into the broker’s bank where your trading account would be credited from. If you already have one then skip this step.
Domiciliary account is an account that holds international currency usually in dollars, pounds, or euro. It allows you to make international transactions from your home country. You need to have a current account before you can open a domiciliary account.
The major requirements needed to open a domiciliary account are:
- Duly completed application form.
- Copies of acceptable means of identification (Driver’s License, International passport, National ID Card, and any other acceptable identification document deemed fit by the bank) Passport photograph.
- Two (2) duly completed and suitable reference forms.
- Utility bill issued within the last 3 months.
The account must be financed with the minimum deposit in the foreign currency to activate it for use.
Step 6: Get the required deposit currency
Most Forex brokers adopt the universal currency for deposits, which is the US Dollar. Other currency deposits like pounds or euro is also accepted. You need to convert your local fund (ie the funds you intend to deposit into your live account) into the deposit currency. You have to get the latest exchange rates before going to the currency market (ie banks or bureau-de-change) else you might be shortchanged.
The total bank charge ie your local bank’s fee and the broker’s bank fee should be added to the total amount you intend to purchase from the currency market for deposit into your live account.
Most traders make the mistake of transferring only the capital needed to trade forex but later get lower figures in their live account because the banks would have taken their fees before crediting their Forex account. To inquire from the broker about the fees that will be deducted from the total deposit, and also inquire from your local bank about the necessary fees required to make a transfer.
Step 7: Get the broker’s bank account details (Wire Transfer)
This should have been sent to you after confirmation of your application. I strongly recommend you request for the broker’s bank account details from the broker’s account department. Take the account details to your bank and use it to fill the Foreign Transfer Account Form.
Wire transfer takes less than one (1) working business week or more to get credited to your trading account.
Source by Onyebuchim Obike C