The Forex market is the largest in the world. It reflects all the events occurring at any moment and often does so extremely fast.
It is one of the most efficient markets in the world. A semi-strong efficient market should react instantly to new information, and this is exactly what the Forex market does.
Compared with the stock market, one may see the price of a stock dropping or advancing instantly on earnings reports. The same is valid when trading currencies – the economic events immediately impact the market and its volatility.
These sudden movements are why people are attracted to financial markets and the FX market in particular. They allow for quick gains if the market moves in the right direction.
Such opportunities exist, and brokers know how to take advantage of people’s desire to make a quick buck. For this reason, some brokers exist that allow trading Forex without minimum deposit requirements.
But what is a minimum deposit?
Some brokers require a minimum amount to be deposited when opening a trading account. It also depends on the type of trading account and its associated conditions.
The amount varies from broker to broker, but some have eliminated the minimum deposit requirement.
Is this good or bad for the FX trader? The answer lies somewhere in between.
Easy to Start Live Trading
No minimum deposit means that anyone can start trading the FX market with little investment. In other words, a trader must find a broker offering such conditions, open an account, get verified, and send the funds.
The main advantage of such trading accounts is that the trader may start live trading right away. Trading on a demo account is recommended anyway, but when opening an account where the broker requires a minimum amount, many retail traders cannot come up with those amounts.
Hence, they postpone live trading, missing opportunities that the market gives.
So the main advantage is that live trading can begin immediately after the account gets verified. But disadvantages also exist, as such accounts come with a bigger risk than others.
No Minimum Deposit Requirement Means High Leverage
When the broker requires no minimum deposit, it means it is willing to accept any amount the trader is willing to deposit. That is – any.
Effectively, it means that the broker offers a highly leveraged trading account. This is the only way to route the client’s orders to the market.
High leverage comes with high risks, but that is not all.
If traders cannot come up with bigger amounts to fund an account, it may mean that they are less experienced in FX trading. Hence, some brokers, especially market makers, may choose to trade against their own customers, a process that has some ethical issues.
However, for a taste of real live trading, no minimum deposit requirements help traders accelerate the process of beating the market. First be present, and then try to make the most of it.