A forex account, is a set up with a broker on a trading platform, in which traders deposit funds and conduct all other administrative duties associated with trading. Foreign exchange accounts are a necessary component of the market because they give traders the ability to control their trading activities within a personalized and secure user interface. The following information outlines basic information about various types, as well as how they're used, in order to help you choose the best one for your needs.
Forex Account Types
There are several types, including demo, mini, full, and managed accounts (with the latter three being the most popular). Demos are usually the first type of an account used by a novice trader, as they provide a free trial and simulation of what trading is like. They let you use virtual money to theoretically conduct trades in a live market. When you conduct a trade with it you are executing a trade based on real market conditions that are occurring at the moment. Mini accounts are the next step for many traders, as they allow you to execute trades in smaller lots than conventional ones, thereby minimizing the risk involved. A full account gives you the ability to trade in larger increments, and is the type used by professional traders. Managed accounts come with assistance, for the novice yet serious trader that needs guidance. When choosing a type, you should base your decision on your individual investment needs and preferences, rather than the extensiveness of the features.
When to Use a Mini Forex Account
Mini accounts are ideal for traders that want to test the waters without investing in lots of $100,000. They allow deposits and lot sizes of $10,000, which is much more suitable for the average novice trader. Thus, mini accounts are often just as popular as full, as many people simply do not have the funds or bravery to invest in $100,000 initially. Some brokers also allow for micro accounts, which let the trader invest in lots as small as $2,000. Finding a flexible broker with low minimum investments is the best way to get started with the market while minimizing risks.
When to Use a Managed Foreign Exchange Account
A managed foreign exchange account is another option for the novice trader, however they are more suitable for traders with more money to invest and an interest in learning as fast as possible. With them, the trades can be conducted automatically by an experienced money manager (similar to the concept of an investment advisor). It is also possible to conduct the trades yourself using managed accounts, with the assistance of your money manager. It is important to note that managed ones vary greatly in terms of fees and minimum deposit amounts, so it is best to shop around before making a selection. Some use proprietary software offered by the broker, many of which claim to increase profits.
When choosing from one of the above types, it is best to review all of the information available online pertaining to prospective accounts. Most of the time there will be reviews available on forums that can help you with your decision tremendously. Never use a trading platform or brokerage without trying their trial demo first, as you may find that you're uncomfortable with their system after making a large deposit. Look for accounts that come with guarantees and 24 hour support in order to reduce your risk even more.