How to Open a Live FOREX Account
Attorneys are not cheap, but they are plentiful; so much for Adam Smith. You can be assured your broker-dealer's account forms generated substantial fees or hours for their legal team.
Account forms are online and can be printed out in hard copy. The broker may request two sets, one of which is returned to you, or should be. If they only request a single set of account documents, verify that you will receive a copy.
Forms are usually Adobe Acrobat PDFs. If so, the broker-dealer's Open an Account page will have the link to the PDF reader if it is not already installed on your computer.
Tip: Grab a screenshot of each page you view on your broker's website for the account registration process. Do this by holding down the ALT+Print Screen keys. You can then copy it to a Word document with CTRL+V. It adds only two or three minutes to the process.
You will generally encounter four steps to opening an account, although they may go by different names or phrases:
- Select an Account Type: As stated, you must first select the account type. Because most forms are online, the selection of an account type tells the automated registration module what to dish up next.
- Personal Information: This is the bread-and-butter name, address, telephone, fax, e-mail, employer, position, Social Security number. Forms beyond individual and joint will require more kinds of personal and account information.
- Financial Information: This step is getting to be more and more involved. The broker wants to make sure you are qualified to trade currenciesâeven if it is a $100 mini-account. I am even seeing broker-dealers requiring what could be called mini-financial statements from prospective customers. If you want to play the game, there is no way out, at least legally. A tax form is usually included in this step, also, for reporting your fortunes to the IRS and to you for reporting to the IRS.
- Review: You will be asked to review the documents carefully before submitting. Againâask the broker any questions you might still have or query your attorney, accountant, or financial planner.
Review your documents twice. If the broker finds something wrong at Step 5 you will have wasted a great deal of time. Some brokers accept applications quite quickly, in one or two days. Others, sticklers for details, can take up to a week or longer.
Two threads run through these documents. The desire of the broker to protect both parties and the NFA's Know-Thy-Customer harmonizing rules, which are getting stricter.
Tip: Start a folder and keep copies of everything! I like to keep a time log of all communications with the broker, including correspondence, telephone conversations, and e-mail. Brokers hold the upper hand, so if there is a dispute, you need all the ammunition you can muster.
You will be asked to snail mail, fax, or scan and e-mail the forms with appropriate information and signatures to the broker. You will need to include a scan of your driver's license or other picture ID. I do not like this either, but it is the way things work with electronic registration; there is a downside to everything.
- Acceptance: Once your documents are accepted, you will be notified that your account is ready to fund and trade. Acceptance typically takes only one or two days unless there is a problem.
- Funding: Now you are ready to fund your account and begin trading. Funding is either by cashier's check or bank wire. Personal checks may be accepted by some brokers, but they take a long time to clear, and they add a step to the process. Better to take the time for a trip to your bank for a cashier's check or a wire transfer.
Some brokers have been accepting PayPal and eGold. Yes, they deduct the fee from your opening balance. Again, the KTC rule is probably going to send these methods to the sidelines.
Before actually trading, spend one last hour with the demo account. Keep at the ready a small notebook or document with the following information at your side; it may either be handwritten or copied from the broker website:
- The broker's hours of operation: when you can contact them by e-mail or telephone.
- Pairs traded.
- The bid-ask pip spread for the currencies you intend to trade.
- The amount of margin and leverage ratio you are using.
- The minimum and maximum trading unit size. Some brokers now offer fractional pips, which can be quite confusing.
- Telephone order backup in case you lose connectivity at a critical juncture. Unfortunately, there is a recent trend toward not offering such a backup. Know your broker's policies.
- Key e-mails for the broker-dealer.
- Your access information to your account. These are typically your account number, login, and password. I recommend keeping multiple copies of this information in different media and locations.
All other primary concernsârequoting practices, stop harvesting, ballooning spreads, communication, platform features, the order entry process, and recordkeepingâshould have been completed long before you decided to open an account.
Tip: On MetaTrader, your demo and live account will work through the same platform; you do not need to download it twice. It is simple to toggle between the two venues. Just be sure you know which one is open at any given time.
In any event, you have yet to set up shop (See Setting Up Shop) and develop a basic trading method before going live. You may wish to return to this section at the appropriate time. When you do go live, start smallâmicro- or mini-lots, and build up as success and confidence warrants.