A forex account is a training or trading account that is opened with a broker and to which money is transferred. With the help of them, a trader or investor conducts operations in the foreign exchange market. Below we will analyze in detail each of the accounts offered by modern brokers.
Training account (or demo account)
This is the safest account in the Forex market, since a trader, working with him, does not risk real money. A demo account is very useful during the training period for Forex trading, for developing a trading platform, for inventing and testing trading strategies. Trading on a demo account, a person does not experience psychological pressure, because he can not lose real money. True, he will not be able to earn them either.
This is the smallest type of Forex account. The trader’s capital is not displayed in dollars but in cents. Therefore, if a trader has only 20 dollars, then he can open a cent account, where they will be displayed as 2,000 cents. Position size, profit or loss, etc. will also be displayed in cents. This is a very convenient account for beginners.
This account is opened in dollars, but the size of the minimum position has been reduced to 0.01 from the standard lot, i.e. up to 1,000 dollars. Thus, to open a minimum position on a micro account with a leverage of 1:20, you need to have $ 50 on the micro account.
This type of Forex account is also reduced. It allows you to work with positions worth more than $ 10,000. In other words, with the leverage of 1:20, you need to have $ 500 in your account to open a minimum position. These types of accounts are suitable for more experienced traders who are still somewhat cramped in trading tools.
This is a classic forex trading. A standard account is the most common. The minimum lot (it is also often called standard) is $ 100,000. To open such a position, you need to have $ 5,000 in the account with a leverage of 1:20 or $ 1,000 with a leverage of 1: 100. Sooner or later, all successful traders switch to standard accounts and trade on a large scale.
ECN is an electronic communications network that allows traders to submit applications directly, bypassing intermediaries. The ECN principle initially worked in the futures and stock markets, but then became available in the currency market. An ECN account allows you to place applications for the purchase or sale of currency directly into a network that unites the largest liquidity providers. The spreads of ECN accounts are floating, sometimes they can reach almost zero values. Instead of the spread, the broker takes a commission. This is a very profitable tool for short-term traders, especially scalpers. Execution on such accounts is much faster, there is access to the so-called level 2 (a glass of orders), which shows not only the best prices for the purchase/sale but also the “market depth”, i.e. the number of trading applications at different levels.
Swap-Free Account (Islamic)
As the name implies, this is a Forex trading account that does not have a swap, i.e. fee for transferring a position to another trading day. This is useful if you plan to hold a position for a long period of time. The second name for such an account is Islamic. Islamic accounts – designed for traders who cannot make transactions on general trading conditions due to religious beliefs.
The main difference between such an account is that swaps for transferring a position to the next day are not removed. Instead, a fixed amount is deducted weekly.
Thus, a large number of different Forex accounts are available, the choice of which depends on the amount of capital and the goals of the trader. Beginners should try their hand at demo and cent accounts, more confident traders will use micro, mini or standard accounts, while scalpers should pay attention to the ECN account. As for large investors who hold positions for a long time, they are better off choosing swap less Forex accounts.