Many personal finance advocates encourage people to start investing from a young age. But it might surprise you that many investment products have an age limit. This article explores the minimum age to start trading forex and investing.
Most forex and CFD brokers, including Scandinavian Capital Markets, have an age limit of 18 years for their customers. Many products and services have legally prescribed age limits that businesses must follow or face harsh legal consequences, such as selling alcohol or gambling products to underage persons.
While most forex brokers and investment firms around the world do not accept under 18-year-olds as customers, it might surprise you to know there are no regulations strictly preventing them from onboarding minors. As there are various legal acts prohibiting the sale of alcohol and gambling products to minors, many assume there are similar rules prohibiting brokers from offering forex and CFD trading accounts to minors, but there aren’t.
While contract law varies by country, the following principle is largely the same across regions where forex brokers are predominantly registered. Brokers choose not to cooperate with under 18-year-olds because minors cannot give their consent to enter a contract, and the minor can void any contracts they entered before the age of 18, sometimes even after they reach the age of 18. Therefore, any agreement with a minor is essentially unenforceable.
For example, we require that our traders are of sound mind, legal age, and legal competence in our terms and conditions.
Because under-18s do not have the capacity to enter into contracts, it is too risky for brokers to provide their services, such as:
While there are no case law examples of this ever happening, one potential risk for brokers is that a minor could conclude a few unprofitable transactions in their trading account. In that case, they could withdraw from the contract claiming they did not understand the terms, potentially resulting in the broker having to refund the client.
Despite the rules and restrictions, and it is almost impossible to open a forex trading account as a minor, many people under the age of 18 have shown a significant interest in trading the foreign exchange markets.
While legally questionable, there are several examples of successful forex traders who began their trading careers well before their 18th birthday. Some examples of successful forex traders who began their careers as a minor include:
To open a live trading account with a forex brokerage, investors need to provide identification that will show their date of birth.
This is not only to prove that an investor is over 18 years old also but for brokers to meet their customer due diligence obligations under international anti-money laundering rules and anti-fraud regulations to ensure that investors are not attempting to open accounts in false names. Therefore, a valid passport, driver’s license or national ID is required, as with other financial products such as opening a bank account.
Most forex brokers offer demo trading accounts and do not require identity or age verification to open demo accounts. This means someone can practice forex trading when under the age of 18, but they will not be able to perform any real trades until they reach the age of 18.
Some brokerages offer custodial accounts, which allow a parent to control and approve the investments within the account with the help of the interested teenager until said teenager reaches the age of majority and is no longer considered a minor.
Custodial accounts are available for long-term investments, but they have not made their way into the speculative trading ecosystem where riskier products are traded, notably leveraged derivatives like CFDs, futures and options.
Contrary to some advice you might find in online forums, you absolutely should not ask a parent or older friend or family member to open a trading account on your behalf. This would likely violate the broker’s terms and conditions and may even be considered fraud, potentially getting the person who opened the account for you into legal trouble.
For example, in our terms and conditions, we write, “no person other than Trader has or will have an interest in Trader’s account(s).”
If you’re under the age of 18 and interested in trading forex, use the time wisely and keep practising. It might feel like you’re missing out on opportunities in the market; there will be plenty of time to trade forex; the market isn’t going anywhere, nor are the opportunities.