How to open a trading account within the financial market
Before opening a live forex account or forex demo account, additionally to creating sure you select the proper broker, it’s also important to create sure you select the proper account type, as this could have an immediate impact on your trading performance.
Since the financial markets are crammed with a range of participants, there are many alternative sorts of trading accounts. So, how does one choose the proper forex account for you?
In this article we’ll discuss everything you wish to understand about opening an acceptable forex account!
What you must consider before opening a forex account
There are many things to think about when opening a web forex account. Whether you’re curious about opening the simplest forex account during a global or local company, there are several key points that you simply must take into consideration.
Many of your decisions are going to be influenced by things like your experience, initial capital and your trading style. However, there are some basic considerations that apply to selecting the simplest forex account, no matter the trader’s level or status. and that they include:
Transaction costs, spreads and commissions
Transaction routing: Direct Processing (STP) or Electronic Communications Network (ECN)
Trading platform and software
Available market group
Let’s discuss each of those in additional detail before we summarize the various kinds of trading accounts available.
1. Importance of transaction costs
Most people trade the currency market (Forex) to form a profit. However, while making the proper trade to require profit is vital, holding that profit is even more important. That’s why your transaction costs, spreads and commissions are so important to contemplate when opening a forex account.
The “spread” is that the cost of trading which is set by the difference between the buying price (ask price) of the market and also the asking price (the bid price).
For example, if the value of EUR/USD is 1.1500/1.1501, the spread are 1 pip. If you were to shop for the currency at 1.1501 and immediately sell it at 1.1500, you’d lose 1 pip.
The spread, therefore, is that the cost of the transaction. Spreads vary throughout the trading day betting on the liquidity and provide and demand of the instrument you’re trading.
Just having the proper style of forex trading account can help a trader stay prior the curve.
2. STP vs ECN
“Dealing desk” brokers, also mentioned as “market makers,” often have business models which will not add a trader’s best interest. this can be because during this form of execution, the broker will usually take the opposite side of your deal. Therefore, they need a vested interest in seeing you lose out on the deal.
The good thing about this can be that they simply match your orders with other orders within the market, instead of taking the opposite side of your trade.
So what’s the difference between an STP account and an ECN account, and why is that this important when deciding which trading account to open?
STP, or direct processing, is where all orders are routed on to the broker’s major liquidity providers. These tend to be the main banks, hedge funds, etc.
3. Access to the most effective software and trading platform
The last item any trader wants is to waste time attempting to find his trade, or watching for it to be executed without success. that’s why most brokers offer to use MetaTrader 4 and MetaTrader 5 as a trading platform within the financial market.
Both platforms offer one-click charting and trading, similarly as many other features such as:
Free indicators and charting tools
Real-time market data
Volatility Protection Settings
Expert Advisors (EA) for custom indicators and automatic trading strategies
Mobile trading application
