A forex account is your deposit, the funds of which you use for speculative operations on the currency exchange. Each broker offers you certain terms of cooperation, which form different types of Forex accounts:
The listed types of forex accounts have their own nuances that must be taken into account to simplify trading activities. Let's consider them in detail below.
Basic conditions and features of using different types of forex accounts
Demo account: This is a virtual account created for the purpose of mastering the basic skills of exchange operations or practicing trading strategies. Its working conditions are often identical to those of a standard real account.
It is created in the terminal, independently choosing the size of the deposit and leverage. Some dealing centers provide an opportunity to create demo accounts - virtual analogs of any of the types of real accounts they offer, that is, not only standard, but also cent, ECN accounts.
Forex account of Standard or Classic type: This is already a real forex account, trading on which is carried out only with real money. Available currencies for replenishment are: RUR, USD, EUR. The minimum deposit for most brokers is zero or one unit of the selected currency. For some DCs, it is 50, 100 USD or more.
For trading on standard accounts, the maximum number of instruments is offered: currency pairs, CFD contracts and metals. Leverage varies from 1: 1-1: 1000 depending on the broker's conditions. The larger it is, the more positions you can open.
An important criterion when choosing a trading account is the size and type of spread on Forex (the difference between Bid and Ask). A fixed spread means that with any market volatility, except for important news and the holiday period, it will be constant, for example, 2 pips. For standard accounts, the spread value ranges from 0 to 7 pips, depending on the popularity of the traded currency instrument. The floating spread can change every second, and its minimum value is 0.1 pips.
Another important criterion for choosing a suitable type of Forex account (in our case, standard) is slippage. The slippage frequency depends on the order execution method and can be of 2 types:
Stop Out for a standard trading account is 10-20%. This indicator indicates the minimum allowable margin size - when it is reached, all open orders will be closed. The minimum lot size for a standard account is 0.01 (micro lot), and the maximum for different dealing centers differs significantly.
Some forex brokers can activate the Swap-Free function for a standard account - this will allow long-term positions to be carried over to each next day without commission.
ECN account: It differs from the standard one in faster order execution and less slippage. The spread on such an account is always floating, but less than on the classic (standard) one and is often equal to zero.
The leverage and maximum trade volume on an ECN account is also less than on a standard one. Stop Out for this type of forex account is 40-60%.
Forex cent account (Cent account): The currency of this type of account is American or European cents. It can differ from the standard one with a large leverage, but with a lower margin for the transaction.
In this case, the limitation for the maximum size of the deposit is relevant. The spread can be fixed or floating - depending on the broker. As a rule, cent forex accounts are serviced without commissions and do not charge an interest rate. For novice traders, this is the right place to start!
Pamm account: This is an investment trading account.
You invest in it, and the managing trader multiplies them (or drains them :-), depending on how successfully he trades). If you have sufficient experience in speculative trading, you yourself can create such an account by describing the conditions for its operation in a special offer.
In addition to the income that you will receive from speculative operations with your capital, you will be charged a commission on the profits of your investors.
Today these are all known and most used types of Forex accounts. Now let's move on to the recommendations for choosing a forex trading account.
When choosing a forex account, first of all, you need to define your goals (as in any other business) - the success of your trading depends on it.
Various options for cooperation offered by brokers allow anyone to realize their analytical potential and increase capital by investing on terms that are acceptable to him. Let's consider the advantages of all types of trading accounts for various categories of traders:
If you are an experienced trader who consistently earns money on the currency exchange and has repeatedly won competitions held by a broker, then you can very well become a manager of your own Pamm account , which will give you huge opportunities to increase capital for management and more additional profit from investors.
And finally, I would like to add that it is trading on a demo account that makes it possible to determine what type of trading and analysis you are interested in. Only after a certain period of virtual speculation can you reasonably evaluate the trading conditions of the preferred broker and choose the most convenient for your strategy.