If you are about to enter live Forex trading and got to pick one from many available Forex accounts, let me help you to sort out which Forex accounts do the job for you!
Now it's down to this moment, you are about to enter live Forex trading and you got to pick one from many available Forex accounts. You see, every single option seems way too good to pass up. So, let me help you to sort out which Forex accounts do the job for you!
How Many Forex Accounts Types are There Anyway?
If you ask that question to every single Forex broker, each one of them will eventually come up with different answers, thanks to IT and computer advances. However, I'll sort them out in each class that best represent them, as follows:
a. Standard Forex Account
This is the most boring, your ordinary run-of-the-mill Forex account type. The go-to account for general purposes especially if you don't like surprises. Everything from spread to commission is adjusted so it will fit most of the clients' needs.
Standard Forex accounts fit general needs of traders; balanced risk vs reward, good services, and fair prices
One trading lot in EUR/USD is equal to $100,000 US Dollar, but thanks to brokers' leverage, you don't have to put that much money. In turn, that huge load of money can produce about $10 dollar profit gains in a single pip movement. So, you'll gain $1,000 if the price moves 100 points in favor of your position. The opposite is also true, you can lose the same amount of money if it goes against you.
(Read More: How Much Leverage from Broker You Should Use?)
- Largest profit potential. Yes, with $10/pip you can rake huge profit in a relatively short amount. That is if you know what you're doing.
- Better security and service. You deserve this after slapping your broker with bucket-load of money! Also, did you know that there's also a VIP account?
- Fair price and trading cost. All hail his standard-ness as he gives us low spread and tight commission.
- Lofty margin requirements. You'll need to deposit a rather huge amount of money, with a minimal amount about $5k-10k just to start trading in standard Forex accounts. Oh boy, what you can buy with that much money?
- Biggest loss potential. And so they say, "no pain no gain". Do I need to elaborate?
b. Mini Forex Account
You know it's not as big as it's boring cousin, but doesn't mean this one is less interesting. Especially when it comes to affordability and flexibility.
Mini Forex accounts are preferable to a beginner due to their light minimum capital requirements and low risk
With a mini lot that is worth about $10,000, each pip movement will score $1. At glance, this may seem diminutive compared to standard ones, but this is also what makes mini Forex account preferable to beginners. In essence, this account is inherently less risky and forgiving. So, you may make some mistakes every now and then, but at least your deposit won't be drained too quickly.
(Read More: Mini Forex Account: What to Consider and How to Get)
Somehow, some brokers decide that a mini account isn't tiny enough, so they come up with the smaller version. Hence, micro account, basically it's only one-tenth of a mini account. And you think they'll stop at that? Welcome to Cent account!
- Least loss potential. It's so forgiving that you can let yourself slip occasionally, but don't make it into a habit!
- Lowest margin requirement. With mini lot it's a no-brainer that brokers will charge you much lesser minimal deposit requirements.
- Lowest trading cost . Some brokers may even offer no-spread or no-swap on this specific account, because it's so cheap. No pun intended, really.
- Least profit potential. With only a $1/pip movement, you can earn more by working as part timer.
- Questionable service quality. At this point, if you suspect that most mini Forex accounts are indeed run by dealing desk broker, you are damn spot on, son! Not necessarily a bad thing in itself, but questionable. Are they fair with their price quotes?
c. Managed Forex Account
As it says on the tin, expect your Forex accounts to get "hacked" by a personal fund manager. But don't worry, it's not that kind of evil hacks, instead those managers will run your account to make profits. The catch is, you will share that profit with the manager under a given contract.
Managed Forex account allows fund manager(s) to run your trading accounts through secured protocols.
And also, those fund managers aren't in anyway guaranteed 100% to bring you easy money. That's why you have to be very careful at choosing with whom you are investing your money into. To do so, you'll need to scrutinize their trading portfolio. For example, you want huge profit in a short time? Look for a manager with high risk-high reward (fast growth, nightmarish draw-down) performance. You want to feel safe? Pick one that's just as conservative (slow growth, no huge draw-down) as you deem fit.
In short, it boils down to your risk appetite. There are many forms of managed Forex accounts, the most popular one is Percentage Allocation Management Module (PAMM).
- Easy access. All you have to do is lift a finger, then let the professionals do the hard market analysis and the whatnot.
- Secure protocol. Don't worry about your account security as the broker got it covered with their strict and controlled network. But before you jump in, check their review by another users (investors).
- Dubious identity. Unfortunately, the only thing you know about the fund manager(s) is only their trading performance.
- No direct involvement. All is well if it ends well. So, let's hope you don't have to intervene too much, because you don't have a say in whatever a fund manager does.
- Added trading cost. A fund manager will charge you with extra commission for their services beside the share (percentage) you obliged to give as well.
d. Social/Copy Trading Forex Account
This is where it starts to get weird, but in a good way, probably, if you like social things. At a glance, this account will grant you the ability to copy a trading position (including stop loss and take profit) from other traders.
Welcome to social trading Forex Accounts, feel free to copy trade other traders' positions. Flaming and defaming are strictly prohibited, period.
I say, this is a major boon if you're that extrovert (but lazy) trader that always looks for guidance from other people. Your usual routines will be like checking a trader's profile while seeing if his/her trading performance is good enough. Chat with him/her, so you can crosscheck whether if their trading record is actual. In before, impress with some bullshit introduction. Copy trade his/her position, done deal! Afterward, you can either smirk ear to ear or slap your forehead depending on your trading results.
(Read More: Top Forex Brokers for Copy Trading)
- Interactive. Those chatty people will feel at home, everyone is happy except that one solitary hermit.
- Networking potential. So many things can happen when you interact with people, especially when it involves money.
- Unpredictable result. Hi dude! No one can guarantee a 100% winning trade. Therefore, you have all the right the blame, flame, and defame one if you feel like doing so. In your dream!
- Questionable identity. Not all traders will disclose their identity. So, if you came across one profile with Spongebob avatars, you better get used to it.
- Makes you dependent on other traders. That lazy behavior needs a beating at some point!
Starting on live trading adventures is a quest no one should take lightly. In a way, your success experience comes from choosing the right Forex accounts. Therefore, you should take your time to decide on one! Along with time, you'll also find another strange and quirky type of Forex accounts. If you find one, do leave a comment on this page and I'll pass it as an update to this article! Sounds good, right?
If you have many requirements for an ideal broker, using the Broker Finder may help you a lot. Why don't you give it a try and find your destined broker? Should there be several choices recommended for you, just use the broker comparison to get the hang of each broker's qualities side-by-side.