Before we start telling all about our main topic for today, let us run through some of the things you need to do when you jump start in the forex trading market. After making up your mind to start trading currencies, the initial thing you need to do is to reach out to a forex broker to open a retail forex trading account. After getting your account approved, you now need to put some money into the account. Now, this money is what we call the account balance. It is basically the amount of money to start up the account.
Tell me more about the account balance.
Let us say you decided to put in a total of $2,000 in your account, and then your account balance, or simply balance, is $2,000. This is startup money in your new account, and this money should only be considered risk capital. And when we say risk capital, it is the funds that you can bet and lose (which we hope you will not).
When are the times when your account balance will change?
Generally, there are only three reasons why your account balance will change. The first one is when your account closes. A trader opens a retail forex trading account because of the apparent reason: to trade currencies. Before an account closing is, of course, opening a position. It is, in layman’s terms, a new trade. Until this newly opened position closes, your account balance remains untouched.
The second cause of account balance change is depositing more money in the account. The final reason is receiving a swap fee or a rollover fee incurred when keeping an open position overnight.
What are swap or rollover fees?
Let us talk about these fees since they make changes in an account balance even when it is more about margins. We call it a rollover when we move an open position from one forex trading day to another. If we explain further, forex brokers open the very same position for the next forex trading day as the forex trading day closes. This is an automatic thing that forex brokers do. During the process, the calculation of the swap is already happening.
Swap fees may be paid or charged. Sometimes, they are charged at the end of the day should you decide to keep your trade open overnight. It is simple. If you pay the swap fee, the money goes to the balance. Now, if it was charged, then the money is subtracted from the balance. We can now see clearly how rollovers and swap fees change the account balance. They do not cause that much of a significant impact unless you love going on prominent positions, these fees can accumulate, and you might be surprised how big the result got.
So, what can we say?
At least now, before opening a retail forex trading account, you already have an idea about what an account balance is. It sure is not a vast topic, unlike the others, but it does not hurt to learn one more thing about forex, right? Who knows? Maybe you would want to do a rollover while going on huge positions!