Types of Forex Trading Accounts

The first type of account that one usually opens with a retail Forex broker is a demo account. This simply lets the trader get a hang of the trading process and execution methods. Afterwards, a trader usually moves into either one of these three common types of accounts.

Standard Forex Accounts

The most common type of Forex account, this trading account has access to standard currency lots worth $100,000. Since the rules of leverage and margin are in order, this means that you don’t necessarily have to immediately invest $100,000 of capital to start a standard account. For a standard lot for trading, you only need to have $1,000 in the margin account.

Most brokers provide better perks and services to standard account bearers because of its adequate up-front capital. It is also the only type of account with each pip worth $10, meaning you get higher potential gains.

Mini Forex Accounts

Mini accounts don’t share the same opportunity to gain as much as standard accounts do because trading $10,000 in mini lots only produce $1 pips. However, a mini account is more ideal for inexperienced traders because standard accounts also have higher risks of loss also because of its higher pip. A mini account is almost similar to standard accounts expect that its transactions use lots that are one-tenth the size of a standard account’s. It also allows for better customization of your risk management and requires lower initial deposits. This is a good choice for those who are hesitant to invest in standard accounts because of the higher capital and risk involved.

Managed Forex Accounts

For those who have the money but have no time or adequate experience in Forex trading, managed accounts are a good choice. They have account managers who make the decisions of buying and selling lots. You simply have to provide the capital, give the goals, and the account managers will do their best to see that these goals are met.

A managed account could either be an Individual Account or part of a Pooled Fund. As the name suggests, an individual has a broker who handles the account by itself. In a Pooled Fund, your investments will be placed in a mutual fund and you will share the profits with other investors. These accounts are categorized according to their risk and reward factors. Those looking for higher profits could go for forex trading accounts with higher risk/reward ratios, while those who are looking for a more stable profit would go for those that have lower risks.

 

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