This article looks at the different types of trading accounts offered by forex brokers.
In order to trade on the foreign exchange market you will be required to open a forex trading account. There are three different accounts available to retail traders, and they are all available via forex brokers. Each account has its own benefits and drawbacks, and it is recommended that you make yourself aware of these. It is also recommended that you consider the different lot sizes available on the accounts.
1. Forex brokers standard trading accounts
The most frequently used account is that of the standard trading account. This type of account allows traders to trade with standard sized lots worth $100,000 each. To open this standard trading account you must invest a minimum of $1,000. This amount of capital will also provide you with leverage amounts of 100:1.
Benefits of the standard trading account include better customer support service, as well as additional trading services and larger perks. This is all due to the standard account holder providing a larger investment than the mini or micro account holders. Furthermore, the potential profits on a standard account are larger. If your position was to move by 10 pips in your favour, you will make $100 as each pip is worth $10. This level of gain is difficult to achieve with other trading accounts.
The disadvantages of a standard account are the potential losses and capital requirements. While you can earn incredible profits, you can lose the same amount. Many forex brokers require a minimum initial investment of at least $2,000, but this varies according to the broker.
2. Forex brokers mini trading accounts
The mini trading account allows the trading to trade in lots equivalent to $10,000. These are known as mini lots. Many of the forex brokers that offer standard accounts will offer mini accounts as well as these are the best accounts for new traders with low capital investments.
The benefits of a mini trading account include low risk, low capital and flexibility. The mini account is low risk as you do not have to use large leverage amounts when trading. Low capital is seen as the mini account can be opened for as little as $250, dependent on the brokerage. Risk management is easily implemented on these accounts.
The primary disadvantage of this account is the low profit. As you are trading with mini lots you cannot experience the same profits as a standard lot trade. However, the risks are lower despite the associated lower profits.
3. Forex brokers micro trading accounts
The micro trading account is mainly used by new traders moving from a demo account to forex live account, therefore it is not popular among the more serious traders. Not all forex brokers offer the account due to the lot sizes being much smaller than a mini or standard with a value of only $1,000. This makes the profits incredibly low and not worthwhile for many brokerages. A micro account can be opened with as little as $25. It does not include high leverage offers and one pip movement is only worth 10 cents.