Deposits – Forex Academy

Introduction

Choosing the right broker is a vital point to consider, as all your transactions such as deposition, withdrawal, opening a position happen in this corner. In the present world, the competition between the retail brokers is so high that it can take a lot of hard work to determine the right broker of your choice.

So, in this lesson, we will discuss some of the most critical criteria you consider before opening an account with a broker.

📍 Security

Security can be considered as the most important criterion to choose a broker. Since traders will be playing around with their money here, it is necessary to make sure that the broker is genuine and trustworthy.

Checking the credibility of the broker is pretty simple, as there are regulatory agencies that disclose the trustworthiness of a broker. So, if a broker is registered with any of these agencies, we can consider the broker to be genuine and secure.

For your reference, some of the regulatory agencies are given below.

National Futures Association and Commodity Futures Trading Commission, in the US
Prudential Regulation Authority and Financial Conduct Authority, in the UK
Swiss Federal Banking Commission, in Switzerland
Australian Securities and Investment Commission in Australia
Investment Information Regulatory Organization of Canada, in Canada
Financial Conduct Authority, in the UK
Cyprus Securities and Exchange Commission, in Cyprus

📍 Types of Fee levied

Many brokers claim that they do not charge any fee other than the spread. However, some brokers do charge different types of fees from the clients, such as brokerage fees, commission fees, daily rollover interest, etc. Therefore, one must verify with the broker on what all charges are imposed by them.

📍 Margin trading

This is no doubt the best feature provided by the forex brokers. Margin trading is the facility provided by the brokers where a trader can open larger positions with a lesser amount. Different brokers provide different margins. So, one must choose their broker by considering the margin provision and also by keeping the risk factor in mind.

📍 Deposit and Withdrawal

It is essential to choose brokers who provide a user-friendly, swift, and fast feature to process the deposits and withdraws. One should check the withdrawal policies of the broker before signing up with them. Because this is where most of the brokers have their hidden costs or undisclosed withdrawal limits.

📍 Trade execution

The trading software must be such that the orders are filled at the best available prices. This is an important factor for scalpers to consider, as every micro pip has significance.

📍 Trading platform

The trading platform also plays a vital role while choosing a broker. For a novice trader, if the UI of the trading platform is not user-friendly, it can become quite challenging for them to place and manage trades. Also, the presence of trading tools and indicators is necessary for professional traders. Hence, one should make sure that the broker meets all your requirements and specifications.

Therefore, considering the above points can definitely help you fetch a good broker for you to trade the forex market.

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In the previous lesson, we have understood the fundamentals of margin/leverage trading. In this lesson and the following few lessons, we shall be discussing different terms related to margin and margin account. And in this lesson, we will primarily talk about balance and also a brief description of the concept of rollover in Forex.

What is Balance?

Balance is the most basic term used in any type of account. Be it a regular savings account, a Demat account, or a margin account. The meaning of balance remains the same in the margin account as well, just like other account types.

Balance in a margin trading account is the amount of capital deposited by the user to his/her trading account. For example, if a trader deposits $1,000 to their margin trading account, then their balance would be equal to $1,000. This is the amount used for taking positions in the market. Apart from that, it is used up for other stuff as well, which will be discussed in the next sections of this article.

Another vital point to note here is that the balance amount is not affected when a trader enters a trade or when a position is open. The balance gets updated only after the trade is closed (rollover fee is an exception).

When does the balance gets affected?

The balance in a margin account is affected in the following ways:

When cash is deposited to the margin account.
When an open position is squared off (closed).
When open positions are kept overnight, so, though positions are open, funds will be debited from or credited to the margin account. And this fee is referred to as the rollover fee.

What is Rollover in trading?

The concept of rollover is not a term that comes under a margin account. However, since this term is closely related to balance, it shall be discussed in this lesson.

As the name pretty much suggests, rollover is the process of shifting an open position from one trading day to another. This is a process that is done automatically by the brokers. As far as the internal working of rollover is concerned, the brokers close a position at the end of the trading day and simultaneously open a new position (at the closing price) the next trading day.

For this rollover to be done, brokers charge a fee called ‘swap.’ This is where the balance comes into the picture, as swap brings a change to the balance. Note that swap happens in both ways, i.e., it can be debited from as well as deposited to the user’s account balance. The interest rates of the currencies are the ones that determine if the swap is to be credited or debited. In simple words, If you are paid swap, the money will be credited to your account balance. Conversely, if you are charged swap, the money will be debited from your account balance.

This concludes the lesson on balance in a margin account. In the upcoming lesson, we shall be discussing two more terminologies related to Margin Trading. Don’t forget to take up the below quiz!

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