If you’ve decided to trade CFDs within the forex market, then you’ll need to open a forex CFD trading account.

But there are quite a few things you need to understand to make sure you get this right. In this guide, you’ll find out everything you need to consider when choosing a CFD provider, and we’ll also show you how to practise making your first few CFD trades without risking any money.

What is a CFD trading account?

When you trade CFDs (contracts for difference), you need to open an account with a registered CFD broker.

See, CFDs are different from traditional forex trades.

‘Standard’ forex trades are as simple as buying one currency with another, and then selling it back when the exchange rate moves in your favour.

(Technically, you buying and then selling US Dollars for a holiday in California is a ‘forex trade’!)

Can I trade forex on CFD?

With forex CFDs, though, you don’t own the underlying assets.

So, if you trade the US Dollar against the Euro with a CFD, you’re not actually buying or selling the dollars or the euros.

Essentially, you’re making a ‘speculation’ on the value of the US dollar against the Euro. So, if the US Dollar strengthens against the Euro, you would profit in this case.

What is a CFD trading account?

CFD trading accounts aren’t massively different to your standard online trading account.

Once you’ve signed up, you’ll be able to access a ‘member’s area’ where you can:

• Add or withdraw funds
• Place CFD contracts on a wide range of different assets (including currencies)
• View the performance of your existing trades
• See a full record of your closed trades (with details on profits and losses)

How to open a Forex CFDs trading account

To open a forex CFDs trading account, you’ll usually be required to provide relevant legal information to prove your identity, such as:

• Legal ID (Passport)
• Proof of address
• Proof of earnings
• Proof of savings
• Tax ID Number

And other key information.

As well as verifying your identity, your CFD broker will also use this information to make sure you’re suited to trading CFDs.

CFDs are inherently high-risk, and CFD providers will want to ensure you’re able to cover yourself in the event of any losses.

Opening your CFD forex account: step-by-step

If you’ve opened any financial account before, then opening a CFD forex account should be relatively similar:

• You choose which broker you want to open an account with
• You fill in their online application
• You then choose a username and password for the portal
• You can then login to their trading platform
• You deposit funds (this will probably involve a check with your bank)

And that’s it. You should be ready to start trading.

How do I choose the right CFD broker for me?

Here are a few key things to look for:

• Good reviews from real traders. Reputable CFD providers should be able to provide real reviews from genuine users.
• Industry awards. If a provider has been around long enough to earn awards from their peers, then that’s a good indication of positive service and long-term stability.
• Tight spreads. ‘Spreads’ are the gap between what a broker will buy at, and what they’ll sell at. Within this spread, you can lose additional money on trades. The tighter the spread – the smaller the gap – the better for you. (If you’d like to know more about spreads in relation to the forex markets, this guide is well worth reading.)
• Does the provider speak your language? Forex markets are open 24 hours a day, 5.5 days a week. They ‘never close’. You’ll need to make sure that wherever you’re trading from, you can speak to someone in your own language, so they can help you with any problems.
• Check what the fees and costs are. All forex brokers will have some fees and costs included in their service: this is to be expected. It’s important though, that they’re transparent about their fees and costs, so that you can be fully aware in advance how much you will pay when you trade.

How can I open a CFD forex trading account and practise trading without risking money?

If you’re in the early days of your career as a forex CFD trader, then you may want to spend time getting comfortable making these kinds of trades without risking any real money.

Sign up for a markets.com account today, and we’ll give you a full ‘demo’ account with synthetic funds, so that you can place as many CFD forex trades as you like without risking real money.

Then, when you are comfortable, you can switch to your ‘genuine’ account and start trading for real.

Summing up:

• A forex CFD trading account allows you to place CFD trades on the forex market
• To open a forex trading account, you’ll need to provide ID, address verification and you’ll usually have to declare the source of your trading capital
• To choose the right CFD broker, look for good reviews, industry awards and full information on costs and fees