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Forex Trading through a Bank Account

It is becoming harder ever day to trust the brokers (see the links I have posted at the bottom of this article). Therefore, Forex traders either have to forget about trading, or find another way of having access to the currency market. Forex trading through a bank account looks like a good alternative. Because banks are more reliable and trusted organizations and governments have more supervision on them, you can trust them more than brokers, or at least you will not be faced with most of the problems that you have with the brokers.

I say “most of the problems” because neither the brokers nor the banks are charitable organizations. They are there to make money, and they will do their best to make more money every day. Therefore, it is expected that even banks try to cheat their clients to make more money sometimes. However, it is less probable.

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How To Trade Forex Through A Bank Account

Before trying to open a Forex trading account with a bank, first you have to make sure that you are already a consistently profitable trader, otherwise there is point to think about having a Forex trading bank account. If you are not a consistently profitable trader yet, keep practicing and learning and passing the stages I have explained here, and then think about having a Forex trading bank account.

Now let’s assume that you are a consistently profitable trader who has been able to repeat his success on a demo account and then a small live account (according to the above articles) at least for 6 consecutive months respectively, and your success is not based on one or two successful positions that probably doubled or tripled your account, and it is based on making profit consistently while taking a reasonable risk and having acceptable profit/loss in each position. Now, in case you can’t trust any broker, you can open a trading account with a bank and start your Forex trading business through a bank account.

To do that, first you have to find a bank that offers such a service in your country. You have to refer to each bank and talk to the account managers and consultants. You have to tell them that you want to open an account to trade currencies against each other, not just to have a regular saving or checking account.

In case they agree to offer you such a service, you can open your account.

Forex Trading Through A Bank Account Is Different

Trading through a bank account is different from trading through a broker. The first difference is that there is no currency pair in your bank account. You should open a multi currency bank account and when you want to trade the currencies against each other, you have to convert one currency to another one.

Your bank account has to cover all these currencies otherwise you will not be able to trade some of the currencies against the other ones:

  • USD
  • EUR
  • GBP
  • CHF
  • JPY
  • CAD
  • AUD
  • NZD

After having all these accounts under your bank account, you have to deposit some money in each account. Because banks usually don’t offer any leverage, you will have to deposit a reasonable amount of money in each account to make a reasonable amount of profit. For example, it doesn’t make sense to deposit 1000 or even 10,000 unit in each account. It has to be a lot more.

As I mentioned above, unlike brokers that some of them are now offering even 1:2000 leverage, legitimate banks don’t offer any leverage for the Forex and stock trading accounts. You have to be careful about the banks that offer a leverage, and you’d better to avoid them and open an account with another bank, because those that offer a leverage are after your money and want to make it easier to wipe out your account like what the Forex brokers do.

As you know, you can wipe out your account or even have a negative balance only when your account is leveraged. Although you can lose money even when your account is not leveraged (I will explain how), you can never wipe out your account even if the market goes against you for thousands of pips.

The other difference is in the spread that the banks offer. Their spread is usually higher than brokers, but that doesn’t hurt you if you trade the longer time frames and hold your positions for a long time (which is what you have to do when you trade through the banks).

Of course, you can always negotiate with the banks and ask them to offer you a good deal. They usually do it specially if you open a big account with them.

As I see, now some banks don’t charge the customers for converting the currencies to each other. They are prefect for Forex trading. It means you can convert the currencies to each other for free and without paying any fees or spread.

How To Buy/Sell Currencies Against Each Other Through A Bank Account

Let’s say you want to go long with EUR/USD. As I mentioned, there is no currency pair when you trade through a bank. Going long with EUR/USD means buying EUR against USD. It means you pay USD to receive EUR. In other words, it means you convert the money you have in your USD account to EUR.

Let’s say you have $100,000 USD in your USD account. When you want to go long with EUR/USD, you can covert all of this $100,000 USD or a portion of it to EUR. You can do this through the Internet and your online bank account. Banks don’t offer trading platforms like MT4. You have to use your online banking system to convert the currencies against each other.

Additionally, banks usually don’t offer good price charting systems. But that is not a problem at all. You can use the demo platform of a broker to do your analysis. Of course, the prices you see on the MT4 platform of a broker will not be exactly the same as the prices that your bank offers, but this is normal. There is no two banks or brokers that offer exactly the same price.

Back to our example, let’s say you convert all your $100,000 USD to EUR when EUR/USD rate is at 1.3786 for example. Therefore, your $100,000 USD becomes €72,537:

$100,000 USD / 1.3786 = €72,537

You hold EURs and the price moves accordingly which means EUR goes up against USD as you expected and it reaches 1.5838 for example.

Therefore, you decide to convert the €72,537 to USD and collect your profit:

€72,537 x 1.5838 = $114,884 USD

Therefore, you have made $14,884 profit because:

$114,884 – $100,000 = $14,884

What if EUR went down against USD instead of going up and it reached 1.0461 for example?

Then you would lose $24,119 if you decided to covert your €72,537 to USD when the price was at 1.0461:

€72,537 x 1.0461 = $75,880 USD

$100,000 – $75,880 = $24,119

You lose $24,119 because EUR went down against USD for 3325 pips. It is a big loss, but still you have $75,880 USD if you decide to convert the €72,537 to USD at 1.0461. I mean your money is not wiped out. This is because there is no leverage here. If there was a 1:100 leverage, then all your USD would be wiped out long time before the price reached 1.0461.

Although $24,119 is still a big loss, having no leverage is a big advantage of Forex trading through the banks. As I mentioned earlier, avoid the banks that offer any leverage, because obviously they want to act like brokers and make your account wiped out as soon as possible.

You may ask what advantages it will have for the banks to offer such services to traders while they charge no fees and offer no leverage for converting the currencies to each other?

Banks want you to deposit your money with them, no matter if you trade Forex or you want to do something else. They use your money to offer loans and mortgages to their other clients to make more money. They use your money to work and make more money. What you see on your online banking account is nothing but just some numbers that go up and down, while your money is still in the bank’s pocket as long as you haven’t withdrawn it.

Your money belongs to the bank and they make the most of it as long as it is in your bank account and you haven’t withdrawn it. Unlike the retail brokers, banks have too many ways to make more money out of your money. Therefore, it is so unlikely that they cheat and make you lose, because they don’t have to do that. It is the brokers who have to cheat to cover their expenses and make profit. I am not saying that banks are saints and angels. They just have some better options to make money than cheating their clients.

Advantages of Trading Forex through a Bank Account

Indeed, trading through a bank account, be it currencies or stocks, is what almost all professional traders and investors do. You can hardly find a professional trader that trades through the retail brokers, not because brokers cheat and can hardly be trusted, but because trading through a bank account has several other advantages and is more trusted.

One of the most important advantages of trading through a bank account is protecting your money while the sudden and strong movements like The Swiss Franc Tsunami occur. If this happens while you have a position and the price goes against you for thousands of pips (like something that happened on 2015.01.15 with CHF cross currency pair), not only your account and everything you have in it will be wiped out, but you also will end up with a negative balance in your account which is your responsibility to pay it back to the broker.

This happens for two reasons:

  1. Your account is leveraged.
  2. You have a single currency account.

Negative balance happens only when your account is leveraged. Although you will lose money if the market goes against you when your account is not leveraged, it will never get wiped out and will never end up with a negative balance.

That is one of the advantages that trading through a bank account has, because banks usually don’t offer leveraged accounts.

But the other reason which is even more important is that your account with a retail broker can be in one currency. For example you open a USD or EUR account and then you can trade the currency pairs through it.

But you have to open a multi-currency bank account when you want to trade through the banks, because banks don’t offer any currency pair like what brokers do on their platforms. After opening a multi-currency account with a bank, you have to deposit money in each of the accounts to become able to exchange currencies to each other. For example you deposit 10,000 unit in your USD, EUR, GBP, CHF, JPY, CAD, AUD and NZD.

Therefore, your whole account will never be wiped out if something like the CHF tsunami happens. The reason is that only those currencies that are involved will be affected, not the other currencies. For example, let’s say you have bought CAD against CHF through your bank account which means you have paid your 10,000 CHF and bought CAD. Then the CHF tsunami happens and CAD loses its value against CHF. Then only the CAD you have bought will be affected not the money you still have in your USD, EUR, GBP, CHF, JPY, AUD and NZD accounts.

This is a big advantage of trading through a bank account, because your money will be safe automatically against the strong and sudden movements.

But there is a problem here which is money. Trading through a bank account needs a lot of money, whereas you can open a $500 or even a $100 account with a broker.

Money can’t be a problem that can stop you. You don’t have to open a trading bank account now if you don’t have enough money. You can keep on making and saving money through your routine job and the other opportunities while you are learning how to trade and you are improving your trading skills.

Maybe the money you make through your full time job is not enough even to cover your expenses, and so, you can never save any money to become able to open a trading bank account. This is the problem that many of those who are learning to trade forex have. That’s why they open a small account with a broker and then they get cheated by the broker and lose that money as well. Chances are the lose their interest and give up on trading for good.

For this reason, we thought about creating a good source of income for our website followers. We through we couldn’t help people to achieve their goals just by teaching them how to trade, because many of them can’t even open a reasonable trading account (they cannot afford it), and they get cheated by the brokers exactly for that reason.

You need a good source of income, no matter if you are already a consistently profitable trader, or you are still learning how to trade.

If you are still learning how to trade, then you have to be able to cover your expenses and keep on learning how to trade with peace of mind.

If you have become a consistently profitable trader, then you have to become able to open a professional live trading account otherwise you can’t make any money through the trading skill that you have developed by spending lots of time and energy. Even if you can afford to open a reasonable live trading account, you still need an extra source of income to cover some probable losses that can happen sometimes, and also to be able to survive when there is no trade setup for a long time.

Therefore, you need another source of income that makes money for you consistently while you trade and invest to make more money.

This is what all professionals do. They have several sources of income including trading and investment. They make money, and then they make their money make more money for them through trading and investment.

This is how it works.

Here at LuckScout.com, we have thought about all these things. That is why we are working on creating some great opportunities to support you and help you to make your dreams come true. Those who follow us properly, will become able to become financially free.

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7 thoughts on “Forex Trading through a Bank Account
  1. Ben Aqiba says:

    Hi Chris,
    great article. Thank you.
    Does the banks pay interest on funds deposited for trade ?

    Thanks

  2. moaied suhail says:

    a bigger picture and a bigger appreciation to Chris

  3. N A says:

    Thank you!

  4. Lynne Pour says:

    Hi Chris,
    Well Done with your new article, Great. You just managed to highlight some of the problems that Brokers have, not to mention the huge risk they have to take, when the Currency Traders all or most decide to bet against them! I think having read your article, made me appreciate my Broker more than before, and wanting to stay put. Lets face it everything costs, but these days there are far too many people expecting something for nothing! I believe if you want service, you have to be prepared to pay for it, Our job as Clients is to shop around and get the service most suitable to our needs, and then try to negotiate the price, instead of expecting it for free, and then complain when we are being charged, or not exactly suitable. Don’t you agree?

  5. Wael Issa ismail yousif says:

    Thanks a lot

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