Types of Forex Accounts

Introduction to Different Types of Forex Accounts

Just as not all fingers are equal, so also forex accounts are varied in terms of funding requirements, specification, usage and a host of other features. On the platforms of forex brokers, there are different types of forex accounts and we shall give a brief overview of some of them.

Why do we have different types of forex accounts? To understand this, we have to look at it from the perspective of the trader and from the broker’s angle as well.

Trader’s Perspective

There are traders who can comfortably come up with $100,000 for trading and can trade position sizes of up to 3 or 5 Standard Lots (equivalent to $30 to $50 per pip) very comfortably. There are other traders who will be hard pressed coming up with even $100. If we had a market which only allowed the high rollers access to the market while locking out the small-capital traders, would this create a fair atmosphere in the financial markets? It certainly wouldn’t. This is why the forex market was deregulated; to allow not just private traders to participate in the art of trading, but also to allow those with heavy pockets as well as those with light pockets to trade. The act of deregulation meant that traders could locate just the right kind of account for their situation and use it accordingly.

Broker’s Perspective

Since the deregulation of the forex market, we have seen daily market turnover rise in astronomic fashion over the years, topping $4trillion. This is because brokers have found it more beneficial to their balance sheets to accommodate everyone in the market, no matter the size of their pockets. Even for ECN brokers where the capital requirements are high, there are still different account types for different categories of traders. Market makers entered the market to provide liquidity, and by fragmenting these positions and distributing them to even traders with very small accounts, fees can be made from all and sundry. So it is actually beneficial to brokers to categorize accounts so that softer entry level requirements can allow even those with what look like inconsequential amounts to gain entry into the market.

Types of Forex Accounts

FXCM Account Types

FXCM Account Types

There are different types of forex accounts. Even though they go by several names, some of them share the same characteristics and can be grouped under the same category.

a)    Micro or Mini accounts

b)    Intermediate accounts

c)     Premium/VIP accounts

Micro Accounts

Micro accounts are small-cap accounts that allow traders to come into the market with very little money; as low as $100. Some brokers have even introduced variations into this account type that allow deposits of as low as $20 to $50. These accounts usually restrict the position sizes of trades on the account to micro-lots (increment of 0.01 lots). This helps the traders to control the risk factor on their accounts. Micro account holders do not usually get benefits from brokers.

Intermediate Accounts

Intermediate accounts usually have the greatest variation in terms of account nomenclature. In some quarters, it is known as the Standard Account, Gold account, the Classic account, etc. The hallmark of this type of forex account is that the minimum deposit is usually set to $500. On some brokerage platforms, it even extends up to $1000. Traders are usually restricted to trading mini-lots, although there are some platforms that allow up to 1 standard lot position sizes on this account type. This is the standard account type that was accessible to entry-level traders in the forex market until two to three years ago when entry level capital requirements were reduced.

Intermediate account holders are given bonuses by brokers, usually from 50% and even up to 100% on all new account deposits. Some brokers may extend a few other bonuses but this is not a constant.

VIP Accounts

VIP or Premium (or Platinum) accounts are as the name implies, for those who can be classified as VIP traders. This account type is for the high rollers; those who can afford up to $10,000 as account opening capital. VIP traders get a lot of bonuses. Brokers who give bonuses on VIP accounts always give these traders 100% bonus. Access to prepaid debit cards, travel benefits, access to technical and fundamental analyses and several juicy bonuses are given to VIP account holders. VIP account holders can trade an unlimited number of Standard Lots and this allows them the potential to make some good money on their accounts.

Conclusion

The information given here is general information. Specific features will differ from broker to broker. It is up to traders to look at the specific type of account that that will match their circumstances before making a definitive selection.

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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