Amongst the many financial markets existing globally, the Forex market is the biggest of them all. The Forex market is where different currencies are exchanged against each other, with daily transactions often surpassing 4 trillion US dollars. The major participants in Forex markets are the central and commercial banks, hedge funds, and multi-national corporations. However, the Forex market is the easiest financial market to access as a retail trader, on a desktop computer or a mobile device and with only a small amount of investment capital. Unlike the ‘big players’, who invest millions in Forex trading, retail traders can get started with limited funds and without any previous trading experience. They just need to select a Forex broker, preferably from the regulated CFD brokers and make an initial deposit indicated in the trading account details. In our experience, regulated CFD brokers stipulate an opening balance of around $100 on a regular trading account, but the amount varies according to the account type and the benefits provided to customers. Nevertheless, there are Forex brokers for beginners, offering micro accounts with deposits from $1, giving novice traders the opportunity to ‘test the waters’ before taking the plunge with bigger investments and riskier trading positions.
Do Retail Forex Traders Need Huge Sums of Investment Capital to Trade?
If retail clients could invest only their own capital into trading Forex, the potential for making a worthwhile profit would be limited to very wealthy investors. However, the best Forex brokers offer marginal trading and leverage to their clients, as part of the online trading package. Leverage lets Forex traders control a larger amount of the market without putting up the full amount of capital. Usually, the amount of leverage accessible on the Forex trading platform, varies from 1:25 up to 1:500. Whilst we have seen regulated CFD brokers offering from 1:1000 up to 1:2000, trading at this ratio level can be very risky and should be avoided by inexperienced traders. Notably, the ratio of leverage offered may depend on the customer’s trading experience and type of trading account. The best Forex brokers often ask customers to prove their Forex trading understanding by taking a simple test on the website. The test results decide the initial leverage ratio, which may be increased as customers gain trading experience. Successful leveraged trades generate larger investment profits for traders than if they had traded using only the funds in their trading account.