How Old Do You Have To Be To Trade Forex? | LiteFinance (2024)

The minimum age for traders set by Forex brokers is 18 years. According to the regulatory principle of KYC (know your customer) and anti-money laundering rules, the broker must identify each user. Minor traders do not yet have sufficient legal rights and the documents necessary for identification.

Such requirements are significant restrictions for those who become interested in the world of finance at a young age. There are many examples of successful traders, investors, and managers who made their first trades at the age of 12-14. How did they do it? What age restrictions do brokers need to comply with? You will find the answers to these and many other questions in this article.

Key facts

• Each broker must comply with KYC/AML rules, which require identifying a potential client by obtaining personal data. Future traders must provide scans of their passport, which is issued at the age of 18 in most countries. Therefore, trading on a real account is possible only after reaching adulthood.

• Parents can open a brokerage account in their name and let a minor use it. However, this option is prohibited, but is often used in practice. The responsibility lies entirely with the one who opens the account and passes verification.

• Opening and trading on a demo account is allowed at any age, as it carries no risks for the trader.

How old do you have to be to start trading Forex?

A person can open a real Forex trading account only upon reaching the age of majority. For most countries, this is 18 years old (in some cases, the trading age starts at 21). There are two main reasons for this.

First reason

In accordance with the rules adopted by regulators worldwide, every financial institution must adhere to KYC/AML principles. You can open a brokerage account only after KYC procedures.

• KYC (Know Your Customer) is a procedure for verifying and identifying a broker's clients before a registration application is approved. The purpose of KYC is to ensure that the client is really who he/she claims to be and that his/her financial transactions are legitimate. The broker may request documents confirming identity, residential address, and other data as part of the KYC requirements.

• AML (Anti-Money Laundering) is a set of rules that financial companies use to prevent and detect money laundering.

The KYC/AML policy is applied primarily to prevent money laundering. Secondly, traders need it. In case of account hacking, they will be able to provide proof of identity.

A passport is required to pass KYC verification. In most countries, it is issued only from 18 years of age. Therefore, brokers cannot physically identify potential traders if they are under 18 and do not have the necessary documents.

Second reason

One of the problems brokers face is the need to meet all the requirements at the same time. For example, a trader is registered in Cyprus and has a CySEC license. This means he/she is obliged to comply with the Cypriot regulator's requirements and work according to local law. At the same time, for example, providing services to a resident of France, the broker is also forced to comply with French legislation. The broker must also follow the MiFID II directive in force in the EU. The minimum age to trade of 18 years is set to unify the requirements for traders in any jurisdiction.

Why don’t Forex brokers accept under-18s?

There is no formal strict requirement to open a brokerage account and start trading on the foreign exchange market only from the age of 18. This point may be specified in the legislation of individual countries. In some countries, on the contrary, it is allowed to open accounts from 14-16 years of age. However, there is an unspoken rule among brokers: they do not open accounts for people under 18 years of age.

Below are the reasons why Forex brokers open trading accounts only for adult traders (18 or 21 years of age or older):

• Legal aspects. Any transaction made by a minor can be challenged in his/her favor. In a judicial/regulatory dispute with adults, the broker participates on an equal footing, but in the case of minors, the courts often take their side. Transactions made by minors without parental consent may be declared invalid.

• Verification problem. Forex traders must confirm their current place of residence. For example, these could be utility bills. But utility bills are not issued for minors.

• Moral and reputational aspects. Transactions with minors are unethical. If a broker becomes involved in legal proceedings with a minor, this could damage its reputation.

The key point is the inability of most people at a young age to assess risks and take responsibility for their actions. Therefore, Forex brokers set a limit of 18 years. At this age, a person bears full responsibility for his/her actions from a legal standpoint and can be a defendant in court.

The situation in the stock market is slightly different. Here, for potential minor traders, there is a so-called transitional age. For example, in one of the CIS countries, there is an intermediate age of 14 years:

• Until the age of 14, an account for a child is opened by parents who have full control over it.

• At the age of 14, the child receives the first passport and the right to open a bank account, which his/her parents cannot control.

• At 18 years of age, a child receives all the rights of an adult.

The country's legislation allows a minor child from 14 years of age to open individual investment accounts (IIA). Minors can enter trades only with written permission from parents, adoptive parents or trustees. They can obtain such a permit from a broker using a pre-created template. In practice, it is difficult to obtain parental consent for every transaction, so some brokers refuse such a service, citing internal documents.

What is required to start Forex trading

Below are the minimum requirements for Forex traders planning to open trades in the real market:

• The minimum age of a trader must be at least 18 years old. In some countries, it is 21 years old. Verification is required.

• Confirmation of country residence. Restrictions apply to individual countries due to the specifics of local legislation and countries subject to restrictions by international organizations. For example, many brokers do not work with residents of North Korea, the USA, and Japan.

• Acquaintance with User Agreement. Before opening a brokerage account, traders must study all trading conditions, rules and also understand and accept all possible risks of Forex market trading.

• Availability of a payment method registered in your name (bank card, electronic wallet).

When trading on a demo account, there are no restrictions in Forex.

How to get started with Forex at a minor age

Do you want to learn to trade? Then age doesn't matter. What is important is your desire to learn new information and apply the acquired knowledge in practice. Sources of information are listed below:

• Offline and online courses. Most often, they are free. This is a good option for beginners, as the courses provide basic knowledge and show areas for development.

• Educational materials on brokers' websites. For example, you can sign up for a free LiteFinance course for beginners, advanced and professional traders.

• Webinars dedicated to a specific topic.

• Books that deeply examine the specifics of trading. As a rule, the authors are professional, experienced traders and investors.

• Investment blogs that often publish short articles on specific topics.

• Analytical portals and news sites. Here you can find official statistics on financial markets, the dynamics of their changes, and the opinions of analysts (Investing, TradingView, CoinMarketCap, Finviz).

• Trader forums are an inexhaustible source of interesting investment ideas. Here, you can ask questions and take part in the discussion.

• Forex signals. Some brokers allow you to connect demo accounts to the accounts of professional traders. By watching how trades are automatically opened on an account, traders learn to trade.

You can hone your new skills on a demo account. Its advantages are listed below:

• It does not require verification. You can open it in two minutes. Age does not matter when trading a Forex demo account.

• It does not require depositing money. You won't lose anything. You are only investing your time.

• It fully complies with the conditions of the real market.

The demo account is available in the browser platform without registration.

Is it possible to trade Forex as a minor?

Growing up depends not so much on age but on the development of intelligence, determination, and financial literacy. An adult, even at 40 years old, may not be inclined to trade, while a teenage trader may already show interest and desire to make money.

Below are interesting examples from the history of trading when minor traders showed unique abilities:

1. Jonathan Lebed (USA) went down in history as the youngest stock fraudster in the world to admit his guilt.

Jonathan became interested in trading at a young age. He read financial news and even participated in discussions on trading forums.

In 1996, when he turned 13, he received $8,000 as a birthday present from his father. He spent the entire amount on America Online shares. The account was opened for an adult. After a year and a half, $8 thousand turned into $28 thousand. Later, Jonathan Lebed began using the Pump & Dump fraudulent scheme. When Lebed turned 17, his activities attracted the US Securities and Exchange Commission (SEC) attention. In 2000, a settlement agreement was concluded on mutually beneficial terms with partial compensation for damage to the victims.

2. John Doukas (Europe) is listed in many sources as one of the youngest traders and investors. He started making his first trades on a demo account at the age of nine. Four years later, he began real trading under the supervision of his parents.

3. Dash Yarnold (USA) is one of the most famous teenage traders. He became interested in the stock market at the age of 11, and at 14, he began trading on a real account. He used two trading strategies at once. This involved aggressive trading in technology stocks and conservative trading in defensive assets.

To trade Forex without violating laws and requirements, minors should:

• Use a demo account. Any Forex broker provides access to demo accounts to everyone, regardless of age.

• Open trades on an account that is registered to an adult trader (parents, other relatives, friends, etc.). This is prohibited. However, if the account owner has given his/her consent, then this is not a fraud since it is impossible to prove who exactly opened trades on the account. In this case, the account owner is fully responsible for the minor's actions.

• Choose cryptocurrency trading. Some cryptocurrency exchanges do not require verification if you trade small volumes. But, regulators are trying to eradicate this practice.

If you are under 18 years old, you cannot:

• Look for a broker that does not require verification. If a broker is negligent about security requirements, two concerns arise. Will your account be protected? Is a broker that does not comply with regulatory requirements reliable? This may turn out to be a kitchen, which itself acts as a counterparty to traders’ transactions, trying to get your money.

• Use someone else's documents for verification. Most Forex brokers prohibit deposits from third- party accounts, so your name must be on the card. Even if you somehow gained access to someone else's card and copies of documents, which is fraud, you are still at risk. The broker can ask for visual verification at any time.

No matter how old you are, you can find options that meet the laws and regulatory requirements to try to trade Forex. But don't try to deceive the broker. This may result in the blocking of the account without the possibility of withdrawing money, or even being accused of fraud.

Conclusion

• You can open a real account with a broker only if you are 18 or 21 in some countries. Sometimes, minors can open an account from the age of 14-16, provided that their parents confirm each transaction.

• You can use a demo account at any age since trading is carried out with virtual funds and is risk-free.

• Adult traders are prohibited from opening an account in their own name and transferring it to minors. This is a common case since it is almost impossible to prove who exactly managed the account. The Forex account owner bears the risks.

If you want to try your hand at trading without risking anything, then it doesn’t matter how old you are. Learn, read, analyze, and train your intuition and speed of decision-making. You can open a demo account at any age. Thus, by 18, you can become a professional, ready to start real trading.

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.