A forex account allows you to trade with the forex market easily. Usually, you sign up with an online broker to get an account and start trading. You will have to fund it, or you cannot make live trades.
But different forex accounts offer various features. Some of them are for very active traders, while others are for the more conservative types.
Therefore, it’s essential to be careful when opening an account. You should know what kind of account fits you best and which accounts are suitable for what purpose.
In this article, we’re going to go through different forex accounts. We will check them out and maybe find the best account suitable for your trading personality and goals.
But first, we’ll go through what you need to know before choosing.
Different Accounts have Different Purposes
As we have mentioned, account types vary depending on their purpose. And the purposes depends on which type of trader needs the account.
So, to find the best forex account, you must know the following about yourself:
Your Risk Tolerance
Certain trading account types are for active, high-risk traders. More conservative traders also have their options.
But if you don’t know your risk tolerance, it’s going to be challenging to know which account suits you best.
Your goals are your destination. But you shouldn’t set vague and unrealistic goals, like, “I will get rich and retire on my island.”
You see, setting a goal like is not only unrealistic; it’s also impossible to interpret it in any unambiguous terms.
Instead of doing that, you can set specific target dates, figures, and plan to get your going.
Your Time Horizon
Your time horizon usually goes with your risk tolerance. Although it’s different for different people, younger individuals typically have longer time horizons, and therefore they’re ready to take on higher risks.
There are hundreds of different trading strategies out there. But you don’t have to choose from any one of them. You can create your trading style.
After knowing what your goals, risk tolerance, and time horizon are, check out which trading style fits them best.
You can think of your trading personality as a cumulation of all the previous factors. Your risk tolerance, goals, time horizon, and trading style will define what trading character you have.
And when you know who you are as a trader, you’ll know what kind of account is best for you.
Demo and Live Trading Accounts
Now, for the account types, we’ll start with the two most basic categorization: the demo and live accounts.
Demo accounts, as the name suggests, let the forex trader “demo” the market by using virtual money to trade real-time market conditions.
Test your profitability, drawdowns, and other performance measures using a practice demo account.
You’ll also get the following benefits:
- you can evaluate the forex broker’s service minus the risk of losing real money
- most brokers let you open demo accounts free of charge if you provide a small amount of personal information
- practice your strategies and see how it would fare in real trading
Usually, brokers limit the number of virtual funds the trader can trade in this demo forex account. There’s also a time limit.
Nonetheless, experts generally advise traders to use a demo account before opening a real, live trading account.
After graduating from using demo accounts, it’s time to test your skills using a live account.
A live trading account needs your money to get running. After you’ve funded it, you can start opening trades.
You can buy, sell, and hold trades in this account, with different lots, depending on the type of trading accounts available.
And this segment is where different account types differ broadly.
Take Time to See the Forex Accounts
Forex brokers typically have gimmicks to make their accounts more attractive to clients.
So, when you’re considering a broker, take time to compare the services and different forex accounts.
For example, Fundiza, a broker, has an illustration of different Fundiza trading accounts.
You can then easily compare which account offers the best services you need.
Now, the following are the most common services that differ from one forex account to another.
Most forex brokers offer VIP or premium accounts in exchange for a higher deposit amount.
This feature depends on the type of broker you’re using. But typically, having access to dealing desks is a premium advantage for traders.
Forex brokers usually offer the same trading platform on all account types. However, some of them provide a customized proprietary trading platform with features fitting their client’s needs.
A forex account might offer you the advantage of analytical trading tools. Generally, premium accounts provide more analytical tools.
API Access (Automated Trading)
You can open a trading account with automatic features to buy or liquidate your assets without manual intervention.
Lot sizes also differ in the number of trading accounts. Usually, there are:
- micro-accounts – a micro lot or 1,000 units of the base currency
- mini accounts – a mini lot or 10,000 units of the base currency
- full accounts – standard lot size or 100,000 units of the base currency
If managing your account doesn’t sound so hot, you can try managed accounts too. You can try:
- individually managed account
- pooled managed account
- discretionary managed account
- social trading
- automated managed account
So, there you have it. With further research, you can expand your knowledge about different forex trading accounts. And you’ll almost certainly find the best one that fits you.