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Types of Forex accounts: which one to choose? 

Types of Forex accounts: which one to choose? 

 

As long as the trader "trains" on a demo account, the question of which type of account is better is of little concern to him. But when switching to real money it's very important to make the right choice - we'll risk to give some advice.

 

Each trading deposit option is offered by the broker to the client as a separate project, which has specific technical, financial and bonus characteristics. The trader or investor often misses specific details that can reduce trading losses or simply make trading more comfortable. Let us remind you of three groups of criteria to consider when choosing a deposit. Check forex broker ranking 2021 to find what brokers are working now. 

 

Contents 

1 Type of investment

1.1 Demo (demo) account

1.2 Real trading account

1.3 Bonus account

1.4 PAMM account

2 Investment amount

2.1 Standard account

2.2 cent account

2.3 Swap-free account

3 Order execution method

3.1 Standard (classic) account

3.2 ECN accounts

4 What did it bring?

Type of investments

In addition to the usual options we venture to include in this category two more.

 

Demo (demo) account

A deposit on which the broker transfers virtual means so the trader could simulate usual trades. Works in a standard terminal, with the same trading conditions (assets, spreads/swaps/commissions) and quotes as a trading account with real money. Full statistics are kept on trading results, automatic trading is allowed, indicators, signals and news are available as usual. The main thing is that a broker must use the same quotes flow for a demo account, without any breaks or adjustments. As a rule, demo accounts are supported for all types of accounts, that are available on a particular trading platform, some brokers may limit the validity period.

Everyone starts with a demo account, where they learn how to trade, check indicators, practice strategies and money management. Profits and losses are virtual, but experience is real. Further on such accounts are used along with regular deposits.



Real trading account

In order to conduct transactions the deposit should be replenished with money. Trading conditions are determined by the account type from the "assortment" offered by the broker - see the official site. Transactions are executed on real quotations, the speed of execution of requests is worse than on a demo account, requotes and other problems are possible.

 

The transition to a real account (irrespective of the sum) is possible only after the training course and reception of stable profits on a demo-account.

 

Bonus account

Sometimes a broker for promotional purposes offers to open an account with a virtual sum, usually a small amount ($10-$100), for example, as a bonus for depositing or for participation in a contest. This amount is used to open trades, you can withdraw the profit earned with it, and sometimes you can withdraw the bonus itself if certain conditions are met, such as trading turnover. A great chance for beginners to get trading experience and a small real profit.

 

PAMM-account

PAMM-projects (variants - RAMM, LAMM) allow the investor to profit from trades with the total capital proportional to the sum of his investments, and the trader (manager) - his predetermined percentage of the profit. Trading statistics is public, you can join or leave the project at any time. It is rather effective variant of the passive income for those who doesn't trade independently or doesn't have big capital for realization of the trading experience.



Size of investment

The amount of the deposit determines the trading possibilities and potential level of profit (and loss!). The same trading lot on different types of accounts means different levels of possible losses. We assume that our reader correctly understands the risk and intends to invest a non-critical for him/herself capital. So ...

 

Standard account

Without leverage, the size of a standard forex lot is $100,000 (or the equivalent in the selected currency). The balance of the deposit is reflected in dollars, the minimum lot - 0.01, the price movement of 1 pip (in 5-digit quotes) costs $0.1 or 10 cents.

 

This is a full-fledged type of deposit for real trading, the deposit amount depends on the leverage provided by the broker. It is used by experienced traders or confident beginners. It is possible to open the account with $10-100, but it is recommended to invest not less than $200-500 to obtain the appreciable profit with the normal risk. Mid-term transactions from 1 day or nonaggressive intraday trading are suggested. For speculation, either a more serious deposit or a trading account of the following category is required.

Cent account

Higher leverage allows the trader to use a trading account whose balance is displayed in cents, for example $50 will be displayed as 5000¢. Minimal lot is the same - 0.1, but 1 point of price movement will cost $0.01 - 1 cent. Such account allows almost one dollar to start: the process and trading conditions are the same as on a standard account, but the risk of actual losses is 10 times less. Profit, accordingly, also grows 10 times slower. Optimal choice for a smart beginner - losses are not critical, and successful trading brings incentive prize. Moreover, you can put a larger amount on such an account, but work on the same scale.

 

Some brokers, such as Alpari, are experimenting with micro accounts in which, with a minimum lot of 0.1, the point value is only 0.1¢. Such projects make sense only when testing strategies or using automatic advisors with martingale.

Swap-free account

Today, most popular brokers offer deposits that do not charge a swap - commission for transferring an order to the next trading day. They are called "Islamic" because they were designed for clients who strictly adhere to Islam's prohibition on usury income. The broker has the right to require proof of the client's respective religious affiliation, but usually these rules are not very strict.

 

Swap-free accounts are preferred by experienced traders, at least on medium-term, who keep transactions open from a week and longer.

 

If you are ready to trade on standard real and the broker has Islamic accounts, try them, but make sure you know how to change the deposit type if you change your mind. Keep in mind: such accounts have additional commissions for opening/closing, so the broker practically loses nothing, and how beneficial it is for you - think about it.

 

 

Order Execution Method

Let us remind you that the type of order execution (instant execution or market execution) for each type of deposit is determined by the broker and does not change. This criterion might be crucial when choosing - it determines the key technical parameters of a deal: price "quality", speed of order execution, spread type, StopLoss/TakeProfit/StopOut levels and others. If you do not work on an exchange platform directly, then any broker will offer you two options.

 

Standart (classic) account.

Market execution implies that an order is guaranteed to be opened at the "best" (from the market point of view, of course) price, which is present in the quote flow at the moment the broker opens the order. For the time while the broker processes the order, the price changes, and the result of the transaction can be worse than you expected.

 

Constant spreads/commissions are offered, but a delay in order execution is allowed on an unstable market (read the contract carefully). This is not always beneficial, but it simplifies technical analysis and money management. There are usually no limitations on the types of orders, automatic trading and other parameters.

 

This type of deposit is suitable for non-aggressive technical trading, it is not recommended for scalpers and other risk-takers.



ECN accounts

The order processing method is supposed to be instant execution: the order is triggered at the moment when the market price compares with the price in the order, taking into account the slippage range (set by either the trader or the broker). If the asset is too volatile, the order will not work at all (requotes), but when executed, the price will be the most accurate and profitable for the trader. Closing is also at the optimal price.

 

The speed of execution is high even in the speculative market, the spreads and commissions are dynamic and are lower than the fixed ones on the standard account, but they can also be too high, all depends on the liquidity of the asset. There are restrictions on working with pending orders and setting StopLoss/TakeProfit (only after the order is opened).

 

But, as they say, "the spread solves everything" - today these are the most popular and profitable conditions for all types of assets and trading techniques, despite the additional risks.

 

 

What's the result?

Is it worth it to open deposits at different brokers or to keep all capital at one site? In terms of risk - it makes sense to keep a small and large deposit on brokers with the most convenient trading conditions, if you can manage to keep constant control of all accounts. But it is clearly not profitable to spread the capital on several fundamentally similar projects.

 

The broker from https://tradersunion.com/ has the right to unconventionally "name" the types of forex accounts and establish special rules, for example, to restrict access to certain types of assets  or to open separate deposits for cryptocurrencies and binary options. Sometimes VIP accounts with more comfortable spreads or bonuses are offered for large clients, but there may be hidden dangerous "features" there as well. In any case, the technical characteristics should correspond to the general classification, so study all the terms carefully and do not give the broker an extra chance to cheat yourself.