Types of Forex accounts: detailed explanation
A forex account is a training or trading account that is opened with a broker and to which money is transferred. With their help, a trader or investor carries out operations in the foreign exchange market. Below we will analyze in detail each of the accounts offered by modern brokers.
Demo account (or demo account)
This is the safest account on the Forex market, because a trader, working with it, does not risk real money. A demo account is very useful during the Forex trading training period, for mastering the trading platform, for inventing and testing trading strategies. Trading on a demo account, a person does not experience psychological pressure, because he can not lose real money. He won’t be able to earn it either.
This is the smallest type of forex account. Trader’s capital is displayed in cents instead of dollars. Therefore, if a trader has only 20 dollars, he can open a cent account, where they will be displayed as 2,000 cents. Position size, profit or loss, etc. will also be displayed in cents. It’s a very convenient bill for beginners.
This account is opened in dollars, but the size of the minimum position is reduced to 0.01 of the standard lot, ie to 1,000 dollars. Thus, in order to open a minimum position on a micro account with a leverage of 1:20, you need to have $50 on the micro account.
This type of Forex account is also reduced. It allows you to work with positions worth from 10,000 dollars. In other words, with a leverage of 1:20 you need to have $500 in your account to open a minimum position. Such accounts are suitable for more experienced traders, who are still a little bit constrained in trading tools.
It’s a Forex classic. The standard account is the most common. The minimum lot (also often referred to as a standard lot) is $100,000. To open such a position, you need to have a 5000 dollars account with a leverage of 1:20 or 1 000 dollars with a leverage of 1:100. Sooner or later, all successful traders go to standard accounts and trade with a large scale.
ECN is a network of electronic communications that allows traders to place orders directly, bypassing intermediaries. ECN-principle initially worked in the futures and stock markets, but then became available in foreign exchange. An ECN account allows you to place orders to buy or sell currency directly to the network of the largest liquidity providers. Spreads of ECN accounts are floating, sometimes they can reach almost zero values. Instead of spread, the broker takes the commission. It is a very profitable tool for short-term traders, especially scalpers. Execution on such accounts is much faster, there is access to the so-called level 2 (glass of orders), where you can see not only the best bid/sell prices, but also the “market depth”, i.e. the number of trade orders at different levels.
Swap-free account (Islamic)
As the name implies, this is a Forex trading account where no swap is charged, i.e. the fee for transferring a position to another trading day. This is useful if you plan to hold a position for an extended period of time. The second name for this account is Islamic. Islamic accounts are intended for traders who cannot make transactions on general trading conditions due to religious beliefs.
The main difference of such an account is that swaps for the position rollover to the next day are not withdrawn. Instead, a weekly fixed amount is written off
Thus, a large number of different Forex accounts are available, the choice of which depends on the size of the capital and the purposes of the trader. Beginners should try their hand at demo and cent accounts, more confident traders will find micro, mini or standard accounts, while scalpers should pay attention to the ECN account. As for the large investors who hold positions for a long time, it is better for them to choose the non-scheduled Forex accounts.
You can choose a suitable account in the section “Account Search”.