When a trader decides to trade and chooses a broker, he is offered many types of accounts to select from. It’s the toughest decision for a trader to choose an account type. Fuad Ahmed, a currency trading expert explains that a trading account is the real determiner of success for traders. In the previous years a trader had to face several challenges to get an account made but, the inception of trading software has resolved this issue for many traders and brokers today.
Mr. Ahmed further tells that the amount of money you are willing to invest decides the kind of account you should open for trading. Many forex trading software help an investor to decide and choose the most suitable account type for himself.
In the following passages, Fuad Ahmed is going to help his readers about the advantages and disadvantages of different sizes of accounts so it’s easier for traders to decide what account type they want to opt for.
Different Sizes of Accounts.
Forex trading has become a common practice in the past few decades. It used to be a subject of financial institutions and banks however, the profit rate it offers and convenience that the availability of forex trading software provides, has attracted a whole lot of traders and brokers towards the market. The influx of such a great number of traders has made it a strongest and largest financial market in the world. With the addition of small traders, the volume of transactions in the forex market has exceeded any other trading market in the world. There is no restriction on the amount of money you want to trade, therefore the need for different sizes of accounts cannot be overlooked.
Being the standard and common type of account, it can also be called a “normal account”. The standard size of a lot is 100,000 units, a trader who has an account of this size easily possesses the capacity to trade the standard size lot. The amount of leverage that the brokers keep on this account varies from 1:100 to some brokers going as high as 1:200 and sometimes 1:500. The minimum deposit a broker can have for a standard account is $ 500 whereas some brokers charge as low as $ 200.
Standard Forex accounts are also known as classic accounts. These kinds of accounts are best for established traders that have a clear trading strategy. A standard account produces extreme results, it can either cause a very high profit or a great loss. Therefore, this account is believed to be suitable for experienced traders, who understand all the risks attached with trading and know how to avoid losing money.
Brokers face great risk by their own offers of high leverages to the trader. Whereas, standard accounts can provide brokers with high capital on minimum deposits.
Mini accounts are for novice traders who can use these as practice accounts and start with a small investment. Mini accounts can be started with a lot of 10,000 units instead of 100,000 as minimum deposit. With this size of a lot, novice traders can easily open a mini account for as low as $50 to $200.
These accounts have low risk of a loss therefore, brokers offer as much as 100% bonus on money that traders deposit. The leverage that a broker offers can also rise up to 1:500 to 1:1000 in some cases. A trader can then jump to standard account too.
Mini accounts are not limited to new traders only, many established traders also use them. These accounts are mainly used for the purpose of practice by most of the traders. They use these mini accounts to minimize the risk of losing money and preparing themselves to enter the market. Mini accounts are also used by traders to test new strategies that are being introduced in the market. Furthermore, a trader can always keep mini account and standard account simultaneously with the same broker. A mini account is basically created to provide traders with the easiest way of making a small amount of investment.
A category of accounts even lower than mini accounts is micro accounts. These can be started with a micro lot of 1,000 units. These accounts are primarily for investors not willing to take risk with a huge amount of investment in trading.
These accounts can be opened with an amount of $ 25 or less, so losing money in it does not usually cause investor a blow. These accounts are primarily meant for traders starting with lowest possible amount of money, yet are still keen on trading.
Other kinds of accounts.
Other than the 3 main types of accounts there are
- Cent Accounts
- VIP accounts
- Managed Accounts.