While opening a foreign account and a Forex account might be similar, these are two separate types of accounts that have some key differences between them. A foreign account is simply an account that is held in another country. With a Forex account, you open it with the intention of getting involved in the foreign exchange market.
A foreign account is a type of investment account that you can open with a broker situated another country. For example, if you invest in stocks, you could open a stock account with a broker in Japan. This would allow you to trade in a foreign stock market even though you live in another country. Some investors do this to diversify their investments and make sure that they still have some assets in the event of a domestic recession or financial collapse.
A Forex account is a type of account that you can open with a Forex broker. With this kind of account, you open it with the intention of trading currencies. In the Forex market, you trade one currency against another so that you can benefit from the constant changes in the exchange rate between two currencies. With this type of account, you invest in a specific financial market. With a foreign account, you could invest in many financial markets.
One of the differences between these two types of accounts is the leverage that comes with them. With a foreign investment account, you might qualify for the use of leverage based on your credit. If this is the case, you might get 2:1 leverage in your account. When trading in a Forex account, you must trade with much larger leverage to make any money. For instance, it is common to use 50:1 or 100:1 leverage in a Forex account.
Times to Trade
When you open a foreign account, you can typically only trade when the market for the area is open. For instance, if you open an account in London, you can only trade when the financial market in that area is open. When you trade in the Forex market, you can trade at any time, day or night. The only time the Forex market is unavailable for traders is on the weekends. This gives you more opportunities to trade the market and make money.
- Seeking Alpha: Opening Foreign Brokerage Accounts Is a Silly Idea; Felix Salmon; 2008
- Baby Pips: Six Most Important Things to Consider When Choosing a Broker
- Baby Pips: Leverage the Killer
- Nasdaq. "Forex Market Overview." Accessed Aug. 18, 2020.
- Library of Congress. "The Foreign Exchange Market." Accessed Aug. 18, 2020.
- U.S. Securities and Exchange Commission, Office of Investor Education and Advocacy. "Investor Bulletin: Foreign Currency Exchange (Forex) Trading For Individual Investors." Accessed Aug. 18, 2020.
- U.S. Securities and Exchange Commission. "Foreign Currency Exchange (Forex) Trading For Individual Investors." Accessed Aug. 18, 2020.
Luke Arthur has been writing professionally since 2004 on a number of different subjects. In addition to writing informative articles, he published a book, "Modern Day Parables," in 2008. Arthur holds a Bachelor of Science in business from Missouri State University.