Opening a forex trading account is a significant first step you take as a beginner forex investor. With so many options in the market, it is important to take your time to choose the best forex trading account for your needs.
To successfully choose an ideal account for your needs, you need to consider the type of trader you wish to be, your trading strategy, and your budget. The type of account you choose has an impact on your performance and even profits.
Here is everything you need to know about forex trading accounts.
Forex trading accounts options
To be able to open a forex trading account, you will need to register on a platform under a reliable broker. Any reputable Forex broker offers different trading accounts options to traders.
Common live forex trading accounts are mostly based on lot sizes, which determine the minimum deposit.
Micro/mini trading accounts
As the name suggests, a micro or mini trading account is a type of forex trading account ideal for traders willing to invest a small amount of capital to get started. Usually, a micro or mini account will allow you to enter the market with a deposit of $100 or less. However, low entry deposits come with restrictions with these types of accounts. With a mini account, you can only participate in micro or nano lots as a risk control measure. This makes micro or mini accounts the most ideal for beginner traders.
Standard forex trading accounts
Standard forex trading accounts are also commonly referred to as intermediate or classic trading accounts. Generally, standard trading account are regular types of trading accounts. To create a standard account, you will be required to make a deposit ranging between $100 and $500, depending on the broker platform you are using.
Standard trading accounts allow you to participate in mini-lots or standard lots, even though the latter is rare.
Professional/VIP forex trading accounts
VIP or professional forex trading accounts are reserves for traders with a lot of capital to invest. To open this account, you will be required to maintain a minimum balance of $10,000 or more, depending on the broker. With this account, you buy into standard lots, with some accounts allowing you to trade directly in the market.
A demo account is not a love account. This means that you cannot make real money from trading in a demo account. These accounts are available to all traders and are used to practice trading or test out strategies.
A demo account is a virtual account with virtual currency and is mostly free to open. However, some of them come with a limited usage timeline of about 30 days. Some brokers allow users unlimited access to demo account as long as they open live accounts on the platform.
Demo accounts are important for beginner traders and seasoned traders. As a novice trader, you can use a demo account to understand how different platforms work when choosing a platform. Seasoned traders use demo account to try out new strategies before using them in their live accounts.
Choosing the best forex trading account
Now that you know available forex account options, you need to know how to choose the best one for your needs. Here are a series of questions to ask yourself before you open a trading account.
How much can I afford to deposit?
This is a fundamental question with an effect on your account options. You need to determine how much you are willing to invest as capital to know the accounts options you have. As a rule of thumb, never trade with what you are not willing to lose.
What is my appetite for risk?
Assessing your appetite for risk is an important part of forex trading. If you are conservative, you may benefit from a micron account for nano and micro-lots. If you are an aggressive trader, you can opt for a professional account to access standard lots.
Do I need access to advanced trading tools?
Most times, advanced trading tools are only beneficial to professional traders, and therefore come with VIP/professional accounts. If you are starting out, you do not need a standard or VIP account. Therefore, advanced tools may not be necessary for your trading.
Every successful forex trader must master the art of choosing the right account for their needs. With this guide, you are better placed to choose the most ideal forex trading account for your needs.