Your First Forex Account

Your First Forex Account

Once you have a good knowledge of the basics, the next element you need to succeed in Forex is experience. That is, it isn’t enough to learn about charts. You also need to gain some experience with the markets themselves. 

Now, I’m not suggesting that you open up a real Forex account and start trading. In fact, doing so is a bad idea. What I am suggesting is that you make use of the best tool you’ll even be given to learn Forex – a practice account. 

PRACTICE, PRACTICE, PRACTICE

 Every good Forex broker allows you to trade with a practice account. This simple no-money-required account is your best tool to learn Forex trading. It’s sort of like the old adage “practice makes perfect”. 

Although there is no such thing as a perfect trader, practice will give you the experience to need to understand trading better. It gives you the one tool that will allow you to learn to be a successful trader before you ever put a dime of your own money on the line. 

Opening a practice account is as simple as heading over to a broker, and submitting a simple online form. Don’t just signup for a practice account though, use it! Spend time trading away your practice account. Take the time to lose your entire account balance. Learn different trading systems. Practice reading and back testing different trading system with charts. 

Trade the daily charts, the hourly charts, and even the 15 minute charts. Use your practice account until you’re so sure of yourself as a trader that you can confidently trade any currency pair in any market condition with a reasonable expectation that you’ll win at least 30% of your trades. Making heavy use of a practice account, before you ever put your own money on the line, is the one idea that will gain you the experience you need to become a successful trader.

 Unfortunately, it is also the often the most overlooked element of success amongst newer traders. Too many newcomers to Forex will find a trading system, trade it on a practice account for a week, and come to the conclusion that they simply can’t lose. Of course that idea is never true when it comes to a high-risk trading vehicle and because of it they very often will lose and give up on Forex before they ever gave it a chance. 

Don’t be like 90% of the new traders out there. Make the decision right now to spend 3 months, 6 months, or even a year with a practice account first. That simple decision is the best thing you’ll ever do for your trading career. Once you’ve made that decision, let’s talk about the right time to start trading with your money.

YOUR FIRST REALTRADING ACCOUNT

Two of the most common questions asked by new traders are when should I start trading (don’t believe the guy who tells you after a month of practice), and how much to start with. Let’s deal with the answers to both questions separately. 

WHEN TO START 

When YOU should start trading with real money instead of a practice account is actually a difficult question to answer. It really depends on how comfortable you are with trading, and how sure you are of the systems you’ve put in place to trade with. 

To give some general guidelines, you should have at the very least the following: 

1.  A Clear Understanding of all of the Elements of Success in Forex (see the next chapter)
2.  A trading system that you have both back tested, and traded successfully on a practice account for a period of at least one month (preferably two or three)
3. A confidence level that will allow you to enter your trades, following the rules you’ve put in place, without worry or regret. 

 HOW MUCH TO START WITH 

The next question that needs to be answered is how much money you should put on the line when you do actually start trading with your own money. Again this one is difficult to answer, but it’s easy to set out some guidelines. 

First, you should never start trading with money you can’t afford to lose. If the money you put into your first Forex account will affect you or your family if you lost it all, then you aren’t ready for live trading yet. Continue with your practice account and save whatever you can each month until you have a decent amount saved, that won’t hurt you if you lost it. 

Next, you should never start with an account that is too small. In this case you might open a Forex mini-account with $4,000 - $5,000, or you might start a standard account with $20,000 - $30,000. But, you shouldn’t start an account with a 500:1 leverage and a $500 account balance. Possibly you could open your Forex account with less than the numbers I stated, but you should stick to a 100:1 leverage, and if you feel the amount you have on hand isn’t large enough to fund the account you’ll be better off waiting and saving some more.