Accounts - Accounts Types Explained - Account Explanation

2 Types of Accounts - Standard Account & Micro Account

A demo practice account is a beginners account provided by brokers to help beginners practice trade on the market using this practice account known as a practice account. This demo account helps beginner traders to practice on the online forex market using this demo account which is also known as a practice account. Beginner traders also use this demo practice account to learn how the software provided by their broker works.

In the recent years retail trading has grown hugely in popularity and demand for various types of accounts has grown. There are a lot of different account types available to any trader who wants to invest in the online forex market - Account Explanation.

The forex market is a highly leveraged market for speculating and trying to profit from currency fluctuations and valuations. Traders can buy large/big amounts of currency units using little capital of their own using leverage - Leverage is what makes attractive to many online traders - with leverage a trader can make more profits or losses because they use less of their capital & borrow the rest.

There are different types of accounts available to help investors & online traders better manage their capital & also their trades.

It is therefore crucial that the forex traders consider what they want to get out of their trading, before deciding on account type to open.

Shown Below is a comparison of the two types of accounts commonly used to trade currencies. The forex account types review below explains the different features of each of the types of accounts.

1. Standard Accounts Explained - Standard Accounts Types Described

Account Explanation - Standard Account. A Standard Trade Account is denominated in US Dollars and trades are placed using standard lots/contracts. One standard lot is 100,000 currency units. 1 lot is also known as a one contract. Minimum opening capital for a standard account - at-least $10,000 USD.

1 contract and lot refers to the minimum size of a single trade transaction. This account option is the most suitable for investors with enough capital to invest in forex - this account option requires $10,000 to $50,000 in beginning capital, for this standard account the investor won't be undercapitalized & with good forex money management principles and forex equity management methods, this standard account option has the best chance for profitability because it's not under capitalized. Under capitalization is what makes most investors in forex not profitable.

It isn't recommended to open a standard trading account unless you have a account balance of at between $10,000 minimum and $50,000.

Professional Money Managers recommend $50,000 minimum to open this standard account and only opening 1 or 2 lots maximum per every $50,000 you have on your account. However, most online brokers will still register this standard account for you if you as a trader have more than $10,000.

If an exchange rate for EUR/USD is quoted at 1.4000, then the smallest and minimum trade available in a standard account is worth $140,000 dollars of currency to buy 100,000 EUR. With leverage of 100:1, this is only $1,400 of your money & the rest of the money you'll borrow from your broker (with forex leverage ratio of 100:1, your broker gives you $100 for every $1 that you have, therefore for this trade transaction using only $1,400 of your trading capital, the broker will give you $100 of leverage for every $1 you have, meaning after leverage you'll have $1,400*100=$140,000 which you then can buy 1 standard contract/lot of EUR USD).

For Standard Lots Minimum Price Movement of 1 pip = $10

2. Micro Account Explanation - Micro Accounts Types Described

Account Explanation - Micro Account. Micro Accounts use lot sizes of only 1,000 currency units. These Micro accounts are often appropriate for investors & traders without a lot of capital & sometimes can be opened with only a $5 minimum balance.

This Micro account option is generally best fitted for account equity balances that are between $1,000 and $5,000

This Micro account option allows trader to open trades in micro lots. 1 forex micro lot/contract is one-tenth of a mini lot and one-hundredth of a standard lot.

If an exchange rate for EUR/USD is quoted at 1.400, then the smallest and minimum trade available in a micro account is worth $1,400 used to buy 1,000 EUR. With leverage, this is only $14 of your money and the rest of the money you'll borrow from your broker (with forex leverage ratio of 100:1, your broker provides you $100 for every $1 dollar which you have, therefore for this trade position using only $14 of your trade capital, the online broker gives you $100 of leverage for every $1 dollar you have, meaning after leverage you will have $14*100=$1,400 which you as a trader can then buy 1 micro lot of EURUSD).

For Micro account - Minimum Price Movement of 1 pip = $0.1

In Forex, 1 contract is the standard trade minimum of a given forex currency pair. But many brokers offer fractions of this standard lot to enable more retail investors to access the market. Being able to offer forex micro contracts/lots reduces the minimum trade transaction size thus giving the beginners and also those traders without a lot of capital to start investing to get a feel of the market without investing a lot of capital.

There are learn online tutorials that a beginner trader can read even before opening a real account, and to get extra practice in trading before opening a live account - a beginner trader should open a practice practice demo trade account with a online broker - so as to practice placing trade positions before opening a real/live account and investing with real money.

During the training period using the practice demo trading account, the beginner will learn the key factors needed to succeed in forex such as: education, equity management, trading plan & systems.

The types of trading strategies used and the skills required for any of these 2 accounts are essentially the same - those skills and strategies required for the Standard Account or Micro Account are the same, the only difference to be adjusted are the forex money management principles for each account type.

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Accounts - Accounts Types Explained - Account Explanation

2 Types of Accounts - Standard Account & Micro Account

1. Standard Accounts Explained - Standard Accounts Types Described

2. Micro Account Explanation - Micro Accounts Types Described