Matthew Chandler 20 / May / 24

An Investor's Guide to Forex Market Trading Account Types

Forex trading account types: Information that will make you money

Opening your first Forex account is certainly not something you should prepare for, as it is one of the most serious steps you can take as a beginning trader. Many novice traders rush to choose an account type without understanding it properly. Others find themselves overwhelmed by the multitude of account types available. Both are wrong, but don't worry, our experts are here to help you.

Choosing a Forex account type requires careful consideration of many things, including what kind of trader you want to be, your budget and your trading strategy. The type of account can affect your results and profits, so it is important to choose the account that is right for you. All good Forex brokers allow their clients to choose from a variety of trading account types. However, many account types share certain characteristics, even if they are called differently by different brokers. We will look at each type of Forex account briefly, but first you need to understand what pip value and lot size are.

Point value

The difference between the opening and closing prices of a trade is calculated in pips. Losses/profits on any trade are also calculated in pips. The value of a pip is directly related to the volume of a trade; in Forex, the volume of a trade is calculated in certain quantities, or "lots". This is the number of units of currency you buy or sell in a transaction.

A standard lot is 100,000 units of currency. Mini lots (10,000 units of currency), micro lots (1,000 units of currency) and nano lots (100 units of currency) are also available. The cost per pip depends on the size of the lot you are trading. Therefore, what matters for profit in Forex trading is not which trader earns more pips, but how much each pip is worth.

Since different account types allow you to trade in different lot sizes, it is important to have a good understanding of what these units of measurement (lots and pips) mean before choosing an account type. Therefore, you should check your capital size and trading volume before selecting an account.

Common types of trading accounts

As just described, the most common type of live trading account depends on the lot size you want to trade. Based on this, each type of account also has a different minimum deposit level.

Mini/Micro Accounts

Micro accounts, as their name suggests, are suitable for traders with small amounts of money. These accounts allow you to enter the market with a small minimum deposit (100 dollars or less). Since these accounts have low barriers to entry, trading activity in these accounts is limited. Most micro accounts are limited to trading nano or micro lots. This allows you to control the level of risk, making these types of accounts ideal for beginning traders.

Standard accounts

Different brokers call standard accounts differently. Some brokers call this type of account "classic" or "intermediate". They may also call them "premium" or "gold" accounts, which is a bit misleading since these are the accounts that brokers usually offer. Typically, the minimum deposit on a standard account is between 100 and 500 dollars and allows you to trade in mini lots. However, some standard accounts may also allow trading in standard lots, but this is rare.

VIP/Professional Accounts

While it may seem by the names of these account types that you need to be accredited to open one, this is not necessarily the case. VIP accounts are usually for people with large sums of money. They have higher minimum deposit limits (around 10,000 dollars) and allow you to trade in standard lots. These types of accounts are usually also ECN accounts, meaning they can trade directly in the market.

It's important to note that professional accounts for EU clients are slightly different: according to European regulation ESMA, there are leverage limits for regular retail traders. If you want to access higher leverage levels, you can apply for an EU professional account. In this case, you will need to prove your trading experience and qualifications. This can be done by taking a test or submitting documents.

In addition to the three main account types, there are several other account types that you should familiarize yourself with. Each of these types has a specific purpose.

Demo Account

A demo account allows you to practice trading. A demo account is a virtual account with virtual currency. Almost all demo accounts are free, but may have a limited period of use. It is usually 30 days. However, if you open a real account with the same broker, you can access it again.

Demo accounts are useful for both beginning and experienced traders. Beginning traders can use them to understand the different trading platforms and see the effects of trading in real time. Experienced traders also use demo accounts to test their trading strategies without risk.

Swap-free accounts

Most of the above types of trading accounts charge a swap fee. This is a fee for holding a position overnight. However, traders who want to hold positions for long periods of time, such as swing traders and investors, suffer from high fees in regular accounts. To avoid this, some brokers offer swap-free accounts. While a swap-free account may sound attractive, it is not an easy way to avoid commissions. Swap-free accounts usually have high trading costs and various restrictions. Therefore, it is generally best to avoid this type of account unless you plan to hold a position for a long period of time.

Muslim Forex traders are the exception to this rule. Swap-free accounts are sometimes referred to as Islamic accounts. This is because they are often used by Muslim traders whose religious beliefs prevent them from taking interest commissions.

How to choose the right Forex account for you

Knowing the different types of Forex trading accounts will help you in choosing an account. You should also know your situation well and understand exactly what you want to get out of trading. Therefore, before opening a trading account, ask yourself a series of questions:

These are very useful tools for professional traders who can manage multiple accounts at the same time. It is easy to feel that you want access to a large number of tools, but keep in mind that these tools are not always necessary. You shouldn't sign up for a professional account if you're a beginning trader for the sake of the extra features. It's not worth the large deposit.

FAQ

What is the difference between a micro account and a standard account?

In Forex trading, account types are often based on trading volume. Trading volume is measured in lots and refers to the amount of currency you want to trade. For example, a Micro account allows you to trade in Micro or Nano lots (1,000 and 100 units of currency respectively). A Standard account, on the other hand, allows you to trade in Mini lots and, in some cases, Standard lots (10,000 and 100,000 units of currency respectively).

Which Forex trading account is best for beginners?

All beginner traders should begin with a demo account. This will allow them to practice trading with zero risk. Many beginning traders work on a demo account for at least six months while they get to grips with trading software and trading strategies. After that, the best option for Forex beginners is a micro/mini account. This is because they have lower minimum deposit limits and allow you to trade micro and nano lots.

What types of accounts are available in Forex?

To meet the needs of all types of traders, the best Forex brokers offer different types of accounts. The most common Forex account types depend on trading volume and include mini, standard and VIP accounts. Other popular account types include swap-free/Islamic accounts, demo accounts and social trading accounts.

How much money do I need to open a Forex account?

The amount of money you need to open a Forex account depends on the type of account you want to open. Some brokers allow you to open an account with as little as 20 or 5 dollars. Professional accounts, on the other hand, usually have a minimum deposit of around 10,000 dollars.


For your peace of mind, we have compiled a complete list of unscrupulous brokers.


Tags

Matthew Chandler
Matthew Chandler
Matthew Chandler 33 years old Born in Edinburgh. Married with one child. Graduate University of Cambridge, Psychology course 2011. Works at Acclaim Studios London.

0 Comment

Leave a Comment
Have a project in mind that you think we’d be a great fit for it? We’d love to know what you’re thinking