The foreign exchange market is very vast and diverse and the options for the traders are such too. There are many different problems that the beginner might encounter while starting the trading process and first and foremost, it’s about choosing the right account type. Due to the fact that the forex market offers many different accounts, it is very important for the trader to search for detailed information about each of them, what do they offer you and what are your specific needs or requirements about the future account. It pretty much depends on what is your trading plan, strategy and expectations, thus the article will review the types of forex accounts to make it easier for the beginner to make the proper decision.
Standard Account
The standard account of the forex market is the most common and typical account type. The initial deposit to start the account in most cases is $ 2000, however, brokerage firms can set the prices on their own as well, varying from $5000- 10000. This account is suggested to the trader who already has experience with the currency market and has more or less, has knowledge about it. An owner of this account form has access to $100,000 worth of regular currencies. According to margin and leverage rules, this involves trading a regular lot of $1k instead of $100k.
Another advantage of using this type of account is having access to the additional services from the brokers. However, in case of unsuccessful development of the process, the loss might be very significant, this is why it is not recommended for beginners to start with it.
Mini Account
One of the most frequent account types is the mini account. It is a perfect option for those who want to study the execution process and become used to the brokerage service and entire trading process as well. The money is exchanged in 1/10 lots on mini accounts, meaning 10,000 instead of 100,000. This suggests the mini accounts have smaller initial deposits. The first-time deposit in this case varies between $250-500 and the leverage is up to 400:1. The disadvantage of using this type is that it has a 10 times lower reward compared to the standard account. This type of account, unlike other types of Forex trading accounts, is mainly used by brokerage firms to attract new clients and make them sure that it is a good decision to start the trading process with a lower experience and less capital.
Here is the Micro Account as well, which is a small type of account and can be used by the beginner with the basic knowledge of the market. The initial deposit is as low as $25.
Managed Account
A managed account is a perfect choice if the trader is unwilling to spend a lot of time studying the market trends and execute the trades personally. In this case, the decisions are made by the account managers who receive monthly or yearly commissions. This account has the two types as well, which is individual account and pooled funds.
Professional managers negotiate with each shareholder separately in the first case; in the second, an actual investor’s money is pooled with the capital of other investors in a trading fund. Investors seeking greater yields should prefer a fund with a higher risk/reward ratio, while traders seeking consistent profits should consider more stable funds. The minimum amount needed for an individual account is far higher than for a pooled fund and is often $10,000.
Summing It Up
Finally, to sum up, any traders, regardless of account type, should first verify the broker they have chosen. This might sound to be an easy part but due to the many options on the market, it becomes more and more difficult to choose the proper company. The most common way to choose the most suitable one for you is to search for the reviews and hear other people’s recommendations and thought about the certain company. Most brokers provide new traders with trial accounts and other testing options to help them get used to dealing with them.
The second move is to choose the appropriate real money account form: selecting the appropriate account type is critical for satisfying and relaxed trading. If you find yourself restricted in funds and starting with the Managed Account should not be a wise move, because during the trading process you should not be stressing out about paying your rents or bills. After thoroughly calculating the income and capital of yours, beginners are also advised to consider the time they are willing to spend on the trading process because with a standard account, for example, you will not receive the proper profit while giving it only one hour in a day. Thus, there are a lot of details that should be taken into consideration and most importantly, the trader should not forget to follow the trading plan and strategy, while choosing first the brokerage firm and then the account type.