Which Forex Account Type Suits You?

Forex brokers have created different types of accounts that forex traders can open. This is because they have identified that some account types will be suitable for some and unsuitable for others.

Sadly, many traders do not even realize this, and this is why we will talk a little bit about the different kinds of accounts as they fit the different kinds of traders.

Types of Forex Accounts

While the specific types of accounts will differ from trader to trader, there will be some general similarities in the types of accounts found on the various forex platforms. For instance, there will be:

a)    Standard accounts for traders that will like to trade lot sizes that start from 1 mini-lot and extend into the standard lot range.

b)    There will also be Micro accounts for traders who want to trade lot sizes that start at the micro-lot level.

c)     We can also identify the VIP account types, or the ECN account types that allow traders who have as much as $50,000 to start trading.

d)    We may also have mini accounts, which are found somewhere between the Micro Account and the Standard account types. Some platforms refer to them as the Classic accounts.

Each of these accounts is designed to fit a certain category of market players. So which forex account suits you? A close look at the parameters will show that certain considerations must be made in deciding the right type of account for a trader. These are:

a)    Size of account, or the account capital.

b)    Trading Experience

c)     Profit Goals

Forex Account Types Compared:

Some brokers like Alpari have actually made it easier for traders to make informed choices of the account types that they can select by presenting account comparisons. The account comparison table of Alpari is reproduced below:

forex account types

Check your broker’s website for similar account comparison tables.

Account Size

The size of the trader’s capital is the number one factor used in deciding what type of account suits a trader. The size of the trading capital determines the lot size used, the risk applied to the account, the number of trade positions that can be held open at any given time, as well as the kind of platform that will be made available to the trader for use.

VIP account holders are premium clients. Traders who use the VIP account types (no matter the nomenclature) are the high rollers. These are traders who can afford as much as $50,000 to open an account. This enables them to trade large positions, and to trade multiple positions without assuming too much risk. These traders can also afford to use professional ECN platforms with all the fees that are paid to trade on these platforms.

Micro account holders are the smallest of the pack. These are the traders who can only muster a maximum of $200 in their accounts. This therefore restricts their trade sizes to micro lots. But this is not a bad deal. The truth is that this is where beginners should start their trading careers from, as it is essential for them to learn the ropes of real money trading with small accounts. Mistakes WILL be made: better to make them with small accounts than with large ones.

The other categories are for traders who can muster anywhere between $1000 and up to $20,000. If you have some experience with trading, can trade mini-lots but will not exceed 2 lots, can understand how to distribute risk by using the correct lot sizes, and can use retail platform tools very well, then you can open Mini or Classic accounts.

Trading Experience

We do not need to say much here. Inexperienced traders or beginners have no business with any other account type except the Micro account. This is the learners’ account. If you are very good and have received professional training in forex, you may want to try the VIP accounts and benefit from all that the ECN platforms have to offer.

Profit Goals

For those who want to trade fast, furiously and withdraw from their accounts frequently, you can use the Classic accounts and the VIP accounts. If your goals is more long-term oriented, you can start with a Mini or Classic account and grow it into a large account over a period of 3 to 4 years.

For Micro account holders, the goal should not be to profit. Use this account type to master the art of real money forex trading, then graduate to the next account type (Mini or Classic/Standard).

Adam

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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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