Forex Trading Accounts - Forex Accounts Types Explained - FX Trading Account Meaning
3 Types of Forex Accounts - Standard Account, Mini Account and Micro Account - FX Trading Accounts Examples
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 foreign exchange market online forex trading market - FX Trading Account Meaning.
The Foreign exchange market is a highly leveraged market for speculating on currency valuations. Traders can purchase large amounts of currency units using little capital of their own using forex leverage - Forex Leverage is what makes Forex attractive to many online traders - with leverage a 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 traders better manage their capital as well as their trade transactions.
How a Real Forex Account Looks Like - FX Trading Account Meaning
How a Real Forex Trading Account Looks Like - Forex Account Meaning
It is therefore important that the forex currency 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 three types of forex trading accounts commonly used to trade foreign exchange currencies. The forex account types review below explains the different features of each of the three types of forex trading accounts.
1. Standard Accounts Explained - Standard Accounts Types Explained
Forex Trading Account Meaning - Standard Account. A Standard Account is denominated in US Dollars and 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 account - at least $10,000 USD.
1 forex contract refers to the minimum size of a single 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 account the investor will not be undercapitalized and with good forex money management rules and forex money management strategies, this standard account option has the best chance for profitability because it is not undercapitalized. Under capitalization is what makes most investors in forex trading not profitable.
It is not recommended to open a standard 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 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 account for you if you have more than $10,000.
If an exchange rate for EURUSD is quoted at 1.4000, then the smallest trade transaction available in a standard 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 broker (with forex leverage of 100:1, your broker gives you $100 dollars for every $1 dollar that you have, therefore for this trade transaction using only $1,400 of your forex trading capital, the 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. Mini Account Explained - Mini Accounts Types Explained
Forex Trading Account Meaning - Mini Account. A Mini Account is an account that allows investors and traders to make trades using mini forex lots. A forex mini lot is equivalent to $10,000 which is one-tenth that of a forex standard lot. Forex brokers offer forex mini lots as a way to attract investors who do not have a lot of capital - as the minimum required starting capital for opening a mini account is about $1,000 USD.
Mini forex lots are similar to standard forex lots; however, forex mini lots are traded in lots of 10,000 units of currency rather than 100,000 units. This lowers the initial deposit required to open a mini account and offers better risk management for investors without a lot of trading capital.
This forex mini account is recommended for those traders with only a few thousand dollars as trading capital.
If an exchange rate for EURUSD is quoted at 1.400, then the smallest trade transaction size available in a mini account is worth $14,000 used to buy 10,000 EUR. With forex leverage of 100:1, this is only $140 of your trading capital and the rest of the money you will borrow from your broker (with forex leverage of 100:1, your broker gives you $100 dollars for every $1 dollar that you have, therefore for this trade transaction using only $140 of your forex trading capital, the broker will give you $100 dollars of forex leverage for every $1 dollar you have, meaning after forex leverage you will have $140*100=$14,000 which you can then buy 1 mini forex lot of EURUSD).
A mini account is suitable for account equity balances between $5,000 and $10,000. The trade transaction lots are smaller so the traders without enough capital to open standard forex lots have better money management for their forex account equity balance.
For Mini forex account - Minimum Price Movement of 1 pip = $1
3. Micro Account Explained - Micro Accounts Types Explained
Forex Trading Account Meaning - Micro Account. Micro Accounts use lot sizes of only 1,000 currency units. These Micro accounts are often appropriate for investors and traders without a lot of trading capital and can sometimes be opened with only a $100 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 account option allows the trader to open 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 trade transaction available in a micro 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 broker (with forex leverage of 100:1, your broker gives you $100 dollars for every $1 dollar that you have, therefore for this trade transaction using only $14 of your forex trading capital, the 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 traders to access the forex market. Being able to offer forex mini lots and forex micro lots reduces the minimum trade transaction size thus giving the beginner traders and also those traders without a lot of capital to start investing to get a feel of the foreign exchange market without investing a lot of trading capital.
There is learn forex online tutorials that a beginner 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 trader should open a practice Forex demo trading practice account with a forex broker - so as to practice placing 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 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 3 forex trading accounts are essentially the same - those forex trading skills and forex trading strategies required for the Standard Account or Mini Account or Micro Account are the same, the only difference to be adjusted are the forex money management rules for each forex trading account type.