When it comes to trading forex, a number of different types of trading account are available. These different types of account suit people of all abilities and experiences, and there’s certainly an account to suit you. As you’d imagine, there are pros and cons to each type of account. Here we look at three of the main types of account as well as the pros and cons of each.
Standard Trading Accounts
This is the most common type of trading account. Brokers such as FXPro generally offer a number of different standard trading accounts that operate on different platforms, such as Meta Trader 4, MetaTrader 5 and cTrader.
Each of these different platforms will operate differently, but they’re all broadly the same, with similar pros and cons across all standard trading accounts.
A standard account requires a large amount of capital to trade full lots. This means that most brokers now provide services specifically for people with this type of account. You also have a large amount of ‘gain potential’ when trading forex in a traditional account through pip movement – something that can’t be achieved through other account types.
Most brokers normally ask for a high amount of capital to be injected into the account to begin with, before you even make a trade. Additionally, although ‘gain potential’ is high, so too is ‘loss potential’. As a result, standard accounts are normally best for experienced traders who have large amounts of capital to invest.
Mini trading Accounts
A mini trading account is ideally suited to new traders. This is because it allows traders to trade in smaller lot sizes than a traditional trading account, so it doesn’t require as much capital.
Mini trading accounts are good because they allow investors a lower level of risk than traditional accounts due to the smaller sums traded. Additionally, because of this lower level of risk, you can try out different trading strategies to find one that suits you without worrying about losing a lot of money.
As you may be expecting, low levels of risk also mean low levels of reward, so mini trading accounts aren’t the best if you’re looking to get rich quick. However, they can be great tools to learn with.
Managed Trading Accounts
In a managed forex account, the capital belongs to the investor but the buy and sell decisions are made by professionals, meaning that you receive professional help and can take a hands-off approach. The goals are always set by the investor, not the professional.
Having a professional will help save you time. No more days sat searching the papers and scanning the markets. They can diversify your portfolio with ease and the professional help can only be beneficial.
Getting professional help requires you to make a significant investment – potentially as much as £10,000 with some brokers. Account maintenance fees usually apply on top, too.
Also, if you spot an opportunity in the market, you don’t have control, so they’re also quite inflexible. If you have a lot of money to invest but little time to study the markets and place trades, a managed account is for you.