Can You Trade Forex on TD Ameritrade? Yes, and Here’s What You Need to Know!

Forex trading is the exchange of one currency for another, to make a profit from the fluctuations in the exchange rates.

Forex trading is one of the most popular and liquid markets in the world, with an average daily turnover of over $6 trillion.

If you are interested in forex trading, you might be wondering if you can trade forex on TD Ameritrade, one of the largest and most reputable online brokers in the US.

The answer is yes, you can trade forex on TD Ameritrade, and in this article, we will explain everything you need to know about it, including:

  • How to access TD Ameritrade’s forex offering through Charles Schwab Futures and Forex LLC
  • What are the eligibility and account types for trading forex on TD Ameritrade
  • What are the features and benefits of TD Ameritrade’s Thinkorswim platform for forex trading
  • What are the supported currencies and markets for trading forex on TD Ameritrade
  • What are the fees and commissions for trading forex on TD Ameritrade
  • What are the risks and considerations for trading forex on TD Ameritrade
  • How to get started with trading forex on TD Ameritrade

By the end of this article, you will have a clear understanding of how to trade forex on TD Ameritrade, and whether it is the right choice for you.

Screenshot of TD Ameritrade's platform showing forex currency pairs:
Screenshot of TD Ameritrade’s platform showing forex currency pairs:

Table of Contents

How to Access TD Ameritrade’s Forex Offering Through Charles Schwab Futures and Forex LLC

TD Ameritrade offers diverse investment products but doesn’t directly provide forex trading.

Access to Forex is through its affiliate, Charles Schwab Futures, and Forex LLC.

Charles Schwab handles execution, settlement, and support for TD Ameritrade’s forex clients.

To trade forex, open a separate account with Charles Schwab linked to TD Ameritrade.

You can do this online or by phone, and the process is usually quick and easy.

Once you have your Forex account, you can access it through TD Ameritrade’s Thinkorswim platform, which we will discuss in the next section.

What are the Eligibility and Account Types for Trading Forex on TD Ameritrade

To trade forex on TD Ameritrade, you need to meet certain eligibility criteria, such as:

  • You must be a US resident or a legal resident alien
  • You must have a minimum account value of $2,000
  • You must have margin approval on your TD Ameritrade account
  • You must agree to the terms and conditions of Charles Schwab Futures and Forex LLC

If you meet these requirements, you can choose between two types of forex accounts: standard and futures.

Standard Forex Account

A standard forex account is the most common and flexible option for trading forex on TD Ameritrade.

With a standard forex account, you can trade over 70 currency pairs, with leverage up to 50:1 (meaning you can control $50,000 worth of currency with $1,000 of margin).

You can also trade micro-lots (1,000 units of currency) and mini-lots (10,000 units of currency), which are ideal for beginners and risk-averse traders.

A standard Forex account has no commissions, but you pay a spread (the difference between the bid and ask prices) on each trade.

The spread varies depending on the currency pair, market conditions, and your account type.

TD Ameritrade offers two types of standard forex accounts: commission-free and commission-based.

  • Commission-free accounts have wider spreads, but no additional fees per trade. This is suitable for traders who trade less frequently or in smaller volumes.
  • Commission-based accounts have tighter spreads, but charge a commission of $0.10 per 1,000 units of currency per side. This is suitable for traders who trade more frequently or in larger volumes.

You can switch between commission-free and commission-based accounts at any time, depending on your trading style and preferences.

Futures Forex Account

A futures forex account is a more advanced and specialized option for trading forex on TD Ameritrade.

In a futures forex account, trade standardized currency futures contracts on regulated exchanges.

Contracts specify buying or selling currency at predetermined prices and dates, subject to margins and daily settlement.

A futures forex account has several advantages over a standard forex account, such as:

  • You can access more currency pairs, including exotic and emerging market currencies
  • You can benefit from greater price transparency and liquidity
  • You can hedge your exposure to currency risk
  • You can speculate on macroeconomic events and trends

However, a futures forex account also has some drawbacks, such as:

  • You need a higher minimum account value of $25,000
  • You pay commissions and exchange fees on each trade
  • You face rollover costs when you extend your positions beyond the contract expiration date
  • You have less flexibility and customization in terms of contract size and expiration date

A futures forex account is suitable for experienced and sophisticated traders who are familiar with the mechanics and risks of currency futures trading.

What are the Features and Benefits of TD Ameritrade’s thinkorswim Platform for Forex Trading

TD Ameritrade’s Thinkorswim platform is one of the most powerful and user-friendly trading platforms in the industry.

It offers a comprehensive suite of tools and features for forex trading, such as:

  • Real-time quotes and streaming data for over 70 currency pairs
  • Advanced charting tools and technical analysis indicators
  • Customizable and interactive trading interface
  • One-click order execution and modification
  • Multiple order types and contingency orders
  • Integrated news and economic calendar
  • Paper trading and backtesting capabilities
  • Live chat and phone support

You can access the Thinkorswim platform on your desktop, web browser, or mobile device, and sync your settings and preferences across all platforms.

You can also customize your platform with various widgets, layouts, and themes, and create your indicators and strategies using the thinkScript programming language.

The Thinkorswim platform is designed to help you trade forex with confidence and ease, whether you are a beginner or a seasoned trader.

What are the Supported Currencies and Markets for Trading Forex on TD Ameritrade

TD Ameritrade offers a wide range of currency pairs and markets for forex trading, including:
  • Major pairs: These are the most traded and liquid currency pairs in the world, involving the US dollar and other major currencies, such as the euro, the British pound, the Japanese yen, the Canadian dollar, the Swiss franc, and the Australian dollar. Examples of major pairs are EUR/USD, GBP/USD, USD/JPY, and USD/CAD.
  • Minor pairs: These are currency pairs that do not involve the US dollar, but still involve other major currencies. Examples of minor pairs are EUR/GBP, GBP/JPY, and AUD/NZD.
  • Exotic pairs: These are currency pairs that involve the US dollar or another major currency and a less traded or emerging market currency, such as the Turkish lira, the Mexican peso, the South African rand, or the Thai baht. Examples of exotic pairs are USD/TRY, EUR/MXN, GBP/ZAR, and AUD/THB.
  • Cross pairs: These are currency pairs that involve two less traded or emerging market currencies, such as the Brazilian real, the Russian ruble, the Polish zloty, or the Hungarian forint. Examples of cross pairs are BRL/RUB, PLN/HUF, and ZAR/TRY.
  • Futures pairs: These are currency futures contracts that involve the US dollar or another major currency and a less traded or emerging market currency, such as the Chinese yuan, the Indian rupee, the Israeli shekel, or the Korean won. Examples of futures pairs are USD/CNH, USD/INR, USD/ILS, and USD/KRW.

You can trade forex on TD Ameritrade 24 hours a day, six days a week, from Sunday to 10 a.m.

ET to Friday 5 p.m. ET.

However, different currency pairs and markets have different trading hours and peak times, depending on their geographic location and time zone.

For example, the EUR/USD pair is most active during the London and New York sessions, while the USD/JPY pair is most active during the Tokyo and New York sessions.

You can check the trading hours and market status of each currency pair on the Thinkorswim platform, or on the TD Ameritrade website.

What are the Fees and Commissions for Trading Forex on TD Ameritrade

One of the most important factors to consider when choosing a forex broker is the fees and commissions they charge.

These can have a significant impact on your profitability and trading experience.

TD Ameritrade has a transparent and competitive fee structure for forex trading, which depends on the type of account and currency pair you trade.

Standard Forex Account Fees

As we mentioned earlier, TD Ameritrade offers two types of standard forex accounts: commission-free and commission-based.

The main difference between them is the spread and the commission they charge.

  • Commission-free accounts have wider spreads, but no additional fees per trade. The spread is the difference between the bid and ask prices, and it represents the cost of trading. The spread varies depending on the currency pair, market conditions, and your account type. You can check the live spreads for each currency pair on the Thinkorswim platform, or on the TD Ameritrade website. For example, as of January 7, 2024, the average spread for EUR/USD was 1.3 pips for commission-free accounts and 0.8 pips for commission-based accounts.
  • Commission-based accounts have tighter spreads, but charge a commission of $0.10 per 1,000 units of currency per side. This means that you pay $0.10 when you buy 1,000 units of currency, and another $0.10 when you sell them. The commission is charged in the base currency of the pair, and it is converted to your account currency at the prevailing exchange rate. For example, if you trade 10,000 units of EUR/USD, and the exchange rate is 1.2, you will pay $1.00 in commission when you buy, and another $1.00 when you sell, for a total of $2.00.

To compare the costs of trading with commission-free and commission-based accounts, you need to consider both the spread and the commission.

For example, if you trade 10,000 units of EUR/USD with a commission-free account, and the spread is 1.3 pips, you will pay $13.00 in spread costs.

If you trade the same amount with a commission-based account, and the spread is 0.8 pips, you will pay $8.00 in spread costs, plus $2.00 in commission, for a total of $10.00.

In this case, the commission-based account is cheaper than the commission-free account.

However, this may not always be the case, as the spread and the commission can change depending on the currency pair, market conditions, and your account type.

Therefore, you should always compare the costs of trading before you place an order, and choose the account type that suits your trading style and preferences.

Futures Forex Account Fees

If you trade forex with a futures account, you will pay commissions and exchange fees on each trade.

The commissions are charged by TD Ameritrade, and the exchange fees are charged by the exchange where the contract is traded, such as the CME.

The commissions and exchange fees vary depending on the currency pair, contract size, and contract expiration date.

You can check the current commissions and exchange fees for each currency pair on the Thinkorswim platform or the TD Ameritrade website.

For example, as of January 7, 2024, the commission for trading one standard contract (100,000 units) of EUR/USD was $2.25 per side, and the exchange fee was $0.75 per side, for a total of $3.00 per side.

This means that you pay $3.00 when you buy one contract, and another $3.00 when you sell it, for a total of $6.00.

In addition to the commissions and exchange fees, you may also pay rollover costs when you extend your positions beyond the contract expiration date.

Rollover costs are the difference between the prices of the expiring contract and the new contract, plus or minus any interest rate differential between the two currencies.

Rollover costs can be positive or negative, depending on the direction of your trade and the interest rate differential.

You can check the rollover costs for each currency pair on the Thinkorswim platform or the TD Ameritrade website.

Other Fees

Besides the spread, commission, and exchange fees, there are some other fees that you may incur when trading forex on TD Ameritrade, such as:

  • Overnight financing charges: These are interest charges or credits that are applied to your account when you hold a position overnight. They are based on the difference between the interest rates of the two currencies in the pair, and the size and direction of your position. Overnight financing charges can be positive or negative, depending on whether you are buying or selling the currency with the higher interest rate. You can check the overnight financing charges for each currency pair on the Thinkorswim platform, or on the TD Ameritrade website.
  • Inactivity fees: These are fees that are charged to your account if you do not trade for a certain period. TD Ameritrade does not charge inactivity fees for Forex accounts, but Charles Schwab Futures and Forex LLC may charge a $25 monthly inactivity fee if you do not trade for 12 consecutive months. You can avoid this fee by closing your Forex account or by placing at least one trade per year.
  • Wire transfer fees: These are fees that are charged to your account when you deposit or withdraw funds via wire transfer. TD Ameritrade does not charge wire transfer fees for forex accounts, but your bank or intermediary bank may charge you a fee for sending or receiving a wire transfer. You can check with your bank for the exact amount of the fee.

What are the Risks and Considerations for Trading Forex on TD Ameritrade

Trading forex on TD Ameritrade can be a rewarding and exciting activity, but it also involves significant risks and challenges that you should be aware of and prepared for.

Some of the main risks and considerations for trading forex on TD Ameritrade are:

Leverage risk:

Leverage is the use of borrowed funds to increase your trading exposure and potential returns.

However, leverage also magnifies your losses and can quickly deplete your account balance if the market moves against you.

TD Ameritrade offers leverage up to 50:1 for standard forex accounts, and up to 30:1 for futures forex accounts, which means that you can control $50,000 or $30,000 worth of currency with $1,000 of margin.

While this can enhance your profitability, it also exposes you to the risk of losing more than your initial investment.

Therefore, you should always use leverage responsibly and cautiously and never trade with money that you cannot afford to lose.

Market risk:

Market risk involves losses from unfavorable currency exchange rate changes.

Forex markets are volatile, and influenced by economic data, politics, central bank policies, and more.

Sudden price movements can lead to substantial losses or profits for forex traders.

Stay informed, use risk management tools like stop-loss orders, limit orders, and hedging.

Counterparty risk:

Counterparty risk arises from the other party’s failure in a forex transaction.

TD Ameritrade, via Charles Schwab Futures and Forex LLC, acts as a counterparty.

Exposure to Charles Schwab’s creditworthiness exists; bankruptcy may risk fund retrieval.

The risk is low due to Charles Schwab’s regulation, capital, liquidity requirements, and customer protection rules.

Regulatory risk:

Regulatory risk involves financial loss or legal consequences due to forex law changes.

Forex trading follows rules from authorities like NFA, CFTC, SEC, IRS, and FinCEN.

These rules impact leverage, margin, reporting, taxation, and anti-money laundering in forex.

Regulations may change, varying among brokers or platforms, affecting forex trading.

Always be aware of and comply with rules, seeking professional advice when needed.

TD Ameritrade forex trading has risks, impacting profitability and trading experiences.

Educate yourself, understand risks, and trade cautiously and with discipline on TD Ameritrade.

How to Get Started with Trading Forex on TD Ameritrade

If you are interested in trading forex on TD Ameritrade, here are the steps you need to follow to get started:

Open a TD Ameritrade account:

Open a TD Ameritrade account online or by phone, selecting from individual, joint, IRA, or trust accounts.

Provide personal and financial details like name, address, social security number, income, net worth, and investment goals.

Agree to TD Ameritrade Charles Schwab Futures and Forex LLC terms, verifying your identity and address.

Fund your TD Ameritrade account:

Fund your TD Ameritrade account via wire transfer, electronic transfer, check, or securities transfer.

For forex trading, maintain a minimum account value of $2,000, or $25,000 for forex trading with a futures account.

You can transfer funds between accounts, ensuring sufficient margin and equity.

Download the Thinkorswim platform:

Download Thinkorswim on desktop, web, or mobile, and log in with TD Ameritrade credentials.

Access it through the TD Ameritrade website. Choose your Forex account, link it to TD Ameritrade, and customize it with widgets, layouts, and themes.

Create indicators and strategies with thinkScript programming language.

Practice with paper trading:

Before you start trading forex with real money, you can practice with paper trading, which is a simulated trading environment that allows you to test your strategies and skills without risking any money.

You can access the paper trading feature on the Thinkorswim platform, and trade with virtual money and real-time data.

You can also backtest your strategies and analyze your performance with various tools and reports.

Paper trading is a great way to learn and improve your forex trading abilities, and to familiarize yourself with the Thinkorswim platform and its features.

Start trading forex:

Execute trades on Thinkorswim, monitoring positions and using discussed tools and features.

Access resources like educational materials, news, live chat, and phone support for trading.

While rewarding, forex trading on TD Ameritrade poses risks; educate, trade with caution.

FAQ

Here are some frequently asked questions and answers about trading forex on TD Ameritrade:

Q: What is the minimum deposit for trading forex on TD Ameritrade?

A: The minimum deposit for trading forex on TD Ameritrade is $2,000 for a standard forex account and $25,000 for a futures forex account.

However, you may need more than the minimum deposit to meet the margin requirements and to cover the costs of trading.

Q: What are the best forex pairs to trade on TD Ameritrade?

A: The best forex pairs to trade on TD Ameritrade depend on your trading style, preferences, and goals.

However, some general factors to consider when choosing a forex pair are:

Liquidity:

Liquidity refers to the ease and speed of buying and selling a currency pair, and it is affected by the supply and demand of the currencies, the trading volume, and the market hours.

Generally, the more liquid a currency pair is, the lower the spread and the slippage, and the higher the execution quality and the profitability.

The most liquid currency pairs are the major pairs, such as EUR/USD, GBP/USD, USD/JPY, and USD/CAD.

Volatility:

Volatility refers to the degree and frequency of price fluctuations of a currency pair, and it is influenced by various factors, such as economic data, political events, central bank policies, market sentiment, and supply and demand.

Generally, the more volatile a currency pair is, the higher the risk and the reward, and the more opportunities and challenges for forex traders.

The most volatile currency pairs are the exotic pairs, such as USD/TRY, EUR/MXN, GBP/ZAR, and AUD/THB.

Image of a globe with connected currency symbols: This represents the global nature of forex trading and TD Ameritrade's access to various markets.
Image of a globe with connected currency symbols

Conclusion

In this article, we have explained everything you need to know about trading forex on TD Ameritrade, including:

  • How to access TD Ameritrade’s forex offering through Charles Schwab Futures and Forex LLC
  • What are the eligibility and account types for trading forex on TD Ameritrade
  • What are the features and benefits of TD Ameritrade’s Thinkorswim platform for forex trading
  • What are the supported currencies and markets for trading forex on TD Ameritrade
  • What are the fees and commissions for trading forex on TD Ameritrade
  • What are the risks and considerations for trading forex on TD Ameritrade
  • How to get started with trading forex on TD Ameritrade

We hope that this article has been helpful and informative for you and that you have learned something new and valuable about trading forex on TD Ameritrade.

If you have any questions or feedback, please feel free to contact us or leave a comment below.

We would love to hear from you and assist you with your forex trading journey, find more of our informative articles here.

https://www.youtube.com/watch?v=faSP3Jf5ivo&pp=ygUQQW1lcml0cmFkZSBGb3JleA%3D%3D

Thank you for reading, and happy trading!

 

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