The Forex market is becoming increasingly popular every day. With over 3.5 trillion dollars traded on a daily basis, the market can be both risky and lucrative. There are many types of live Forex trading accounts available in the market. Each of these various accounts come with their own rewards and downsides. Knowing the right trading account is the key to the successful trading experience.
As a beginner, you need to open up an account will a reliable forex trading company. But, how will you know the right account to meet your level of expertise? What is the best trading account suiting your needs? Below is a detailed guide on the different Forex trading accounts.
1. Demo account
This is the entry point for all Forex traders. This type of trading account is offered nearly by all Forex brokers. It gives a trader a virtually equal experience to trade with fewer risks of losing funds. As a trader, you are allowed to test your trading strategy for viability, draw-downs and other performance procedures.
In addition, the Demo account allows for an appraisal of the broker company providing the account without the requirement of real funds. A good number of Forex trading companies will allow a trader to create a demo account without much commitment. The broker will only require a few personal details to complete the registration process.
- This account enables you to trade with liberty. The absence of actual funds implies you trade without any form of suppression.
- A second chance. In case you lose your trading account, there is a good chance to fix the problem and start trading. The capital risks are simulated and have no actual effect on your income.
- Limits. A demo trading account offers limited funds. In addition, there is a limit on the time you are allowed to trade over the platform. Once it expires, you will have to open up a new one.
- Easy to trade the wrong way. Since it’s a demo account, it’s very easy to mismanage it. Where there is freedom to trade the way you want, chances are you will overdo it.
- Profitable spreads: Occasionally this trading account gives impractical spreads that are misleading.
2. Micro Forex trading Accounts
This type of accounts allows a trader to invest a small amount of capital. You can invest as low as $1-$10 to open up the account.
- Low risks-Since you invest low amounts of capital, it becomes easier to control risk factors.
- Minimal profits-With a low investment, you get no benefits from the Forex brokers.
3. Mini Forex trading accounts
Just like its name suggests, the account is ideal for new traders who want to invest small amounts of money. You can trade with a personal investment ranging as low as$100. A large number of forex brokers provides a 400:1 leverage on this type of trading account. This means you can transact as more as $10000 with fewer risks on personal funds. As a result, a trader is likely to reap big more than their investments. The opposite is also true. You can lose a lot of money more than your personal investments. A trader s also allowed to use leverage with mini trading accounts. With higher leverages, you can easily access a substantial trade size equivalent to the actual funds.
- Fewer funds at risk. Accessibility is the major benefits of using this account. It’s affordable to many traders and allows for leverage meaning you can make good money even on a small investment.
- Low risk. Once you are done with a demo account, the mini trading account is an excellent option to jump into. It comes with low risks as compared to other live accounts.
• Limited proceeds: Despite its low risks in forex marketing, the gains are relatively low for an ambitious trader.
4. Standard Forex trading accounts
This is the most typical type of Forex trading account. Its name is attributed to the fact it allows traders to perform standard kind of transactions usually ranging within $10000. With this amount, you dot necessarily have to invest the whole amount. Instead, this forex trading account has a leverage of 100:1. As a trader, you can start with a capital of $1000. Depending on the brokerage firm, there are different requirements to create this type of account.
- Possible for realistic gain. Since you are required to invest big, there is a potential for a genuine gain.
- Extra services from the Forex provider. Standard trading accounts generate good amounts of commissions. As a result, the brokerage firm offers more services as a way of maintaining their clients. For instance, a trader is allowed to access expert FX services, free deposit, bonuses among others.
- Possibility of a huge loss. The same way it’s easy to make huge proceeds, you can also incur huge losses. It’s a two-way traffic kind of trading. The combination of huge capital and leverage makes it ideal for expert traders only. It takes time before you know how to trade well.
- Larger capital investment: The minimal amount of capital required to invest in this type of account ranges from $1000. Only wealthy traders can afford a standard trading account.
5. Managed Forex trading accounts
This is an automated type of trading account where a forex broker executes trades on behalf of the account holder. The role of the trader is limited to providing capital requirements only. The trader will contribute all the capital required but the management of the account lies with an expert Forex company. Your work is to lay down the goals of trading while the account manager tries to achieve the goals. There are various ways of trading with managed trading accounts starting with social platforms all the way to in-house trader services.
- Potential for success- This account is ideal for both experts and beginners. Even with little knowledge in Forex trading, having somebody trade on behalf means the good possibility to make money.
- Freedom: Forex Trading is complex and time-consuming. Having an expert trade for you means you can focus on other things far from the screen.
- The cost of liberty- You must pay a certain fee for somebody else to manage your trading account.
- Possible to lose. You are trading on someone else’s trust. This means you can incur losses out of a robot or human error.
6. VIP trading Accounts
Also known as the premium, this type of trading account is ideal for the high rollers. Only traders who can raise a minimum of $10000 can open a VIP account.
- Lots of bonuses- Traders enjoy up to 100% bonus on their deposits
- Additional services- VIP traders get access to other services such as travel benefits, debit cards, technical analyses among other benefits.
- Only loaded traders can afford to open this type of forex trading account.
- Potential for the big losses-The same way you can make big proceeds, you are also likely to lose.