When you decide to get into trading, you will come across many terms – and you must know the difference between the accounts. Understanding how the accounts differ in forex will mean you can get the best experience for how you want to trade.
The first account that people who want to trade will often go for is a demo account. Almost all top brokers will have a demo account option. The demo account will let people get acquainted with trading safely – and there is no chance you can lose your money – because you won’t be using any.
Demo accounts are ideal for those who want to get into forex trading. Aside from the demo account, there are a couple of other accounts that you have the option to start with.
- Managed account
- Micro Account
- Mini Account
- Standard Account
Each type of forex account has specific features and is suitable for different traders. One of the most common platforms for managing, watching, and learning MT4. MT4 is highly popular because it is customisable and can be used for many trades – FP Markets offers MT4 trading account to get you started.
Managed Account
If you don’t want to spend time researching and understanding the market too deeply, then a managed account is the best option. While you own the account as a trader, you will have a highly-skilled account manager who will take care of the account.
A managed account is handled the same way a stockbroker would manage stock accounts.
One of the drawbacks for many new investors is that managed accounts will typically cost a fee, called an account maintenance fee. Another drawback for smaller investors is that it requires a minimum investment of between $500 and a few thousand.
Managed accounts breakdown into two main categories – pooled funds and individual accounts.
Pooled fund accounts are, as it sounds, funds pooled together along with other investors’ capital. Individual accounts are those handled on a singular basis – i.e., you, the trader, will be working with just one professional manager.
To decide which managed account is best for you, you’ll need to decide on your risk appetite and the goals you have set for investing.
Notes: generally, an individual account will ask for a higher initial minimum.
A flip side to having a human manage your account is having a robot do it for you. Your trading account will be completely automated and set within your chosen parameters. For many, robot investing is the best option because there are little to no fees, and you get the expert trading skills of an AI that can run millions of scenarios before making smart investment choices.
Micro accounts
A micro account is one of the smallest trading accounts and is offered at many ket forex brokers – and these are designed for those just starting their forex journey. The accounts are easy to manage for people with a basic working knowledge of forex and don’t have a large budget to trade with. Some micro accounts can be opened with just $25.
As the name suggests, everything on this account is micro, including pip movements worth 10 cents per point.
Mini accounts
Mini accounts can be the preference of both those experienced in forex trading and those not. There are several benefits to mini accounts, including that they offer more types of risk management.
While micro forex accounts can be opened for $25, a mini account will typically be between $250 and $500.
The downside of a micro account is that it offers a 10-fold lower reward than a normal account. When trading $10,000, a standard account owner earns $10 for every positive pip, whilst a mini account owner will only get $1 in the identical circumstances.
You will likely find mini and micro accounts from brokers who wish to attract (and teach) new traders.
Standard account
Standard trading accounts will have a minimum balance of anywhere between $2,000 to more than $10,000. Usually, they are geared more towards people who understand a bit more about trading than those who would use a mini or a micro account.
One benefit of having a standard account is that brokers give owners of standard accounts a wider selection of services.
When a trader’s position advances in their favour by 100 pips during the day—one pip is worth $10—the daily gain can reach $1,000.
New traders are strongly advised to refrain from putting their capital at risk and from opening standard accounts soon after they begin trading in the forex market. This is because if a position moves unfavourably for a trader by the same 100 pip during the day, it will mean the same significant losses for the trader’s funds.
When you are initially interested in trading, it is highly recommended that you start with a demo account and a limited amount of deposit. Use all of the educational resources on the website you choose so that when you begin to trade (likely on a micro account), you are confident.
