What methods can be used to fund a forex account?

A:

The forex market is where currencies from around the world are traded. In the past, currency trading was limited to certain individuals and institutions. This is because the funds required are significantly higher than any other investment instrument. However, with the development of electronic trading networks and margin accounts, this has changed. Although nearly 75% of forex trading is done by large banks, individuals are now able to invest in forex with as little as $1,000.

The development of the margin account and the use of leverage has made it easier for individuals to trade in forex. By using a margin account, investors essentially borrow money from their brokers. Margin accounts can also be used by investors to trade in equity securities. The main difference between trading equities and trading forex on margin is the leverage that is provided. For equity securities, brokers usually offer a 2:1 leverage to investors. On the other hand, forex traders are offered between 50:1 and 200:1 leverage. This means that traders need to deposit between $250 and $2,000 to trade positions of $50,000 to $100,000. (To learn more, see the Margin Trading tutorial.)

Credit card deposits have by far become the easiest way for investors to deposit funds into trading accounts. Since the development of online payment services, online credit card transfers have become increasingly efficient and secure. Investors can simply log in to their respective forex accounts, type in their credit card information and the funds will be posted in about one business day.

Forex traders are usually given several options when deciding how they will deposit funds into their margin accounts. Investors can simply deposit funds into their trading accounts from an existing bank account or send the funds through a wire transfer or online check. Traders are also usually able to write a check directly to their forex brokers. The only problem with using these other methods is the amount of time that is needed to process the payments. For example, paper checks can be held for up to 10 business days before being added to a trading account.

To learn more, see A Primer On The Forex Market, Getting Started In Forex and Wading Into The Currency Market.

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