Types and features of Forex trading accounts
Not only large international banks can trade Forex, but also private investors, with the intermediary participation of brokers. The results and effectiveness of trading largely depend on the correct choice of the type of Forex account. Each of them is aimed at solving certain tasks.
What is a Forex account and what is it for
This is a trading or training account opened by a broker, where a deposit is stored, and the results of operations performed by a trader are also taken into account. Forex accounts are opened with licensed brokers, which are mostly Forex banks. They are the intermediaries between private investors and the international platform for trading currencies. Moreover, currency trading is primarily available to them, because the minimum lot can reach several million dollars.
Its name indicates the purpose of a training or demo account. Every novice trader gets the opportunity to open such a demo account, with which you can practice making deals, working with indicators and Expert Advisors. A distinctive feature of the training account is the absence of risks, because there are no real funds on deposit. At the same time, some brokers allow the trader to set the balance himself.
A cent account or as it is also called a nano account is an account to which a trader can transfer real money, however, for the user of such an account, the minimum lot has been reduced from 0.01 to 0.0001. However, when depositing an account, for example, for $ 1, the amount in the terminal will look like $ 100. As in the previous case, using a cent account, a trader can practice making deals or test a new strategy without significant losses.
Standard (classic) account
This is an ordinary real account for currency trading, suitable for both beginners and more experienced traders with a minimum lot of 0.01. A characteristic feature of the standard account is a relatively high spread (the difference between the sale price and the purchase price). This feature of the account does not allow it to be used for high-intensity trading, for example, scalping.
STP and ECN accounts
These types of real accounts are characterized by a minimal spread and a high speed of execution of applications. At the same time, the trader trades directly with the counterparty, so the broker cannot influence the process in any way. Fast execution of orders, a low floating spread and a large margin of liquidity make these accounts ideal for intensive day trading and trading using software. Among the disadvantages, we can note strict requirements regarding the start-up capital and a solid commission.
In another way, such an account is called swap-free, and it is intended for traders in the East Asian region, where Islam prohibits usury. Traders get the opportunity to trade with a zero swap and reset the rollover costs, which is especially important for those who hold positions for weeks. However, one thing is important to consider here: the broker may request confirmation of religion.
An ideal option for those who do not like and do not know how to trade on Forex. The PAMM account works as follows: investors transfer their funds to trust management, and an experienced trader (account manager) carries out trading. At the same time, the trader uses his own funds for trading. He also sets the entry conditions. According to the results, all participants receive remuneration in proportion to their shares and also bear losses in proportion.
Published: 24 January, 2023