Foreign exchange trade is unique since it has three trading accounts and each has its own advantages and disadvantages. For you as a trader to set up an account with forex trade before you start trading, you will need to choose which account will work best for you as a trader. This will depend on your tolerance for risk level, time you will be spending in trading daily and the size of your initial deposit investment. These accounts will be chosen based on your skills, experience and knowledge you have in the trading market. In this article, we will discuss about the three trading accounts in foreign exchange.
Standard trading accounts
This is the most commonly used account for foreign exchange trade worldwide. Standard account is mostly ideal for people who want a currency trading experience, traditional spread pricing. Standard account gives the user access to lots of currency. Most brokers provide services to people with standard accounts because it requires adequate deposit capital to trade full lots. Standard accounts offer competitive spreads with no commissions. Just as it’s possible to win up to $1000 in this account, loss potential is also possible. It is mostly recommended for well-funded traders or those experienced in the market.
Most forex brokers usually avail this type of accounts to their traders. You can basically do anything that pertains to trading from within a standard account.
Managed trading accounts
These accounts usually have managers who control the buying and selling of though the capital is yours. As a trader you are only required to set your profit goals and risk management then the managers will work towards achieving it. Trader that needs more profits will put their money in a pooled account with other investors where profits or risks will be shared among them. While some may opt for an individual account where a broker handles it and make decision for each investor. Most managed accounts will require high initial deposit and managers usually keeps commission for themselves as account maintenance. These accounts have no flexibility since you will have to rely on account managers to make their choices.
Mini trading accounts
A mini trading account usually allows traders to make transactions using mini lots. These accounts require low initial capital. These accounts are meant for people who do not have a lot of money that they intend to use on trading. Mini accounts are offered by most forex brokers that also offer standard accounts because the two tend to go hand in hand. In fact, many traders tend to maintain both mini and standard accounts.
Due to the lower amounts of money maintained and allowed to be traded within these accounts, traders have more control over their finances. It is much harder to blow through your money when trading using these accounts. There are several advantages associated with these accounts which include flexibility and low capital investment.
However, just as there are advantages, there are also certain cons, which include low reward, which could slow your growth rate as a forex trader.
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