Forex Trading Accounts - Forex Accounts Types Explained - Forex Trading Account Meaning
3 Types of Forex Accounts - Standard Forex Account, Mini Forex Account and Micro Forex Account
In recent years retail forex trading has grown hugely in popularity and the demand for different types of forex trading accounts has grown. There are many different forex account types available to any forex trader who wants to invest in the online forex market online forex trading market - Forex Trading Account Meaning.
The forex market is a highly leveraged market for speculating on currency valuations. Forex traders can purchase large amounts of currency units using little capital of their own using forex leverage - Forex Trading Leverage is what makes Forex attractive to many online forex traders - with leverage a forex trader can make more profits or losses because they use less of their capital and borrow the rest.
There are different types of forex accounts available to help investors and online forex traders better manage their capital as well as their forex trade transactions.
It is therefore important that the forex forex traders consider what they want to get out of their trading, before deciding on the Forex trading account type to open.
Below is a comparison of the two types of forex trading accounts commonly used to trade forex currencies. The forex account types review below explains the different features of each of the three types of forex trading accounts.
1. Standard Forex Trading Accounts Explained - Standard Forex Accounts Types Explained
Forex Trading Account Meaning - Standard Forex Account. A Standard Forex Account is denominated in US Dollars and forex trade transactions are placed using standard forex lots. One standard forex lot is 100,000 units of currency. One forex lot is also known as a one forex contract. Minimum opening capital for a standard forex account - at least $10,000 USD.
1 forex contract refers to the minimum size of a single forex trade transaction. This forex trading account option is the most suitable for investors with enough capital to invest in forex trading - this forex account option requires $10,000 to $50,000 dollars in starting capital, For this standard forex account the investor will not be undercapitalized and with good forex money management rules and forex money management strategies, this standard forex account option has the best chance for profitability because it is not under capitalized. Under capitalization is what makes most investors in forex trading not profitable.
It is not recommended to open a standard forex trading account unless you have an account balance of at between $10,000 minimum and $50,000.
Professional Money Managers recommend $50,000 Dollars minimum to open this standard forex trading account and only opening 1 or 2 forex lots maximum per every $50,000 dollars you have in your forex account. However, most online forex brokers will still open this standard forex trading account for you if you have more than $10,000.
If an exchange rate for EURUSD is quoted at 1.4000, then the smallest forex trade transaction available in a standard forex trading account is worth $140,000 of currency to buy 100,000 EUR. With forex leverage of 100:1, this is only $1,400 of your money and the rest of the money you will borrow from your forex trading broker (with forex leverage of 100:1, your forex broker gives you $100 dollars for every $1 dollar that you have, therefore for this forex trade transaction using only $1,400 of your forex trading capital, the forex broker will give you $100 dollars of forex leverage for every $1 dollar you have, meaning after forex leverage you will have $1,400*100=$140,000 which you can then buy 1 standard forex lot of EURUSD).
For Standard Lots Minimum Price Movement of 1 pip = $10
2. Micro Forex Trading Account Explained - Micro Forex Accounts Types Explained
Forex Trading Account Meaning - Micro Forex Account. Micro Forex Accounts use lot sizes of only 1,000 currency units. These Micro forex trading accounts are often appropriate for investors and forex traders without a lot of trading capital and can sometimes be opened with only a $5 minimum balance.
This Micro forex account option is generally best suited for account equity balances that are between $1,000 and $5,000
This Micro forex trading account option allows the forex trader to open forex trades in micro forex lots. 1 forex micro lot is one-tenth of a forex mini lot and one-hundredth of a forex standard lot.
If an exchange rate for EURUSD is quoted at 1.400, then the smallest forex trade transaction available in a micro forex trading account is worth $1,400 used to buy 1,000 EUR. With forex leverage, this is only $14 of your money and the rest of the money you will borrow from your forex trading broker (with forex leverage of 100:1, your forex broker gives you $100 dollars for every $1 dollar that you have, therefore for this forex trade transaction using only $14 of your forex trading capital, the forex broker will give you $100 dollars of forex leverage for every $1 dollar you have, meaning after forex leverage you will have $14*100=$1,400 which you can then buy 1 micro forex lot of EURUSD).
For Micro forex account - Minimum Price Movement of 1 pip = $0.1
In Forex, one forex lot is the standard transaction minimum of a given currency pair. But many forex brokers offer fractions of this standard forex lot to enable more retail forex traders to access the forex market. Being able to offer forex micro lots reduces the minimum forex trade transaction size thus giving the forex beginner traders and also those forex traders without a lot of capital to start investing to get a feel of the forex market without investing a lot of trading capital.
There is learn forex online tutorials that a beginner forex trader can read even before opening a real forex trading account, and to get extra practice in forex trading before opening a live forex trading account - a beginner forex trader should open a practice Forex demo trading practice account with a forex broker - so as to practice placing forex trade transactions before opening a real forex trading account and investing with real money.
During the forex training period using the forex demo practice trading account, the beginner forex trader will learn the key factors needed to succeed in forex trading such as; forex education, forex money management, forex trading plan and forex trading systems.
The types of Forex trading strategies used and the skills required for any of these 2 forex trading accounts are essentially the same - those forex trading skills and forex trading strategies required for the Standard Forex Account or Micro Forex Account are the same, the only difference to be adjusted are the forex money management rules for each forex trading account type.