Foreign exchange or forex, the storehouse for foreign currency and exchange, is the method for changing one currency to another. There are different types of forex accounts you need to know about before you jump for forex trading.
Here, you’ll know the various forex accounts types. Before we go there, you need to understand why the forex needs different accounts. Looking at it from the view of the trader and the broker will make it more clear. Let’s get in.
You will find traders coming up with a hundred thousand dollars to trade and can trade position sizes of up to 3 or 5 Standard Lots quite easily. And, some can come with only a hundred dollars.
It won’t be fair if a market only allowed the high rollers access to the market while kicking out the small-capital traders. As a result, the forex market was deregulated. What does this mean? It means that traders could spot just the right account type for their situation and use it suitably.
Brokers find it to be more advantageous to their balance sheets to occupy everybody in the market. Also, for ECN brokers, there are different accounts for different traders. Market makers stepped into the market to supply liquidity, and by breaking these positions and sharing them with traders with very small accounts, payments can be made from everyone.
Now, Let’s Get into the Types of Forex Accounts
There are mainly three types of forex accounts. Every forex account has a different name although some of them have the same characteristic features. They sometimes also can be assembled into the same category.
- Micro accounts
- Intermediate accounts
- VIP or Premium accounts
Micro account or mini account is defined as a small-cap account that permits traders to come into the economy with a very little amount, even as little as $100. Some of the brokers have also initiated differences into this account category that allow advance payments of as low as $20 to $50.
These generally limit the position sizes of the trades on the account to micro-lots. It assists the traders to manage the risk factor on their accounts. Micro account holders do not get gains from brokers.
Based on account nomenclature, intermediate accounts generally possess the most contrasts. It is also called the Standard account, Gold account, the Classic account, etc. in certain quarters. The distinctive feature of this forex account is that the least sum of the deposit is generally fixed to $500. On some brokerages, it expands up to $1000.
Traders are limited to trading mini-lots, although some platforms let till 1 standard lot position sizes on this category of account. This is the quality account category that was reachable to entry-level traders in the forex market until 2 to 3 years ago when entry-level capital demands lowered.
Premium, VIP, or Platinum accounts are for the VIP traders, who can afford up to $10000 as account opening capital. Brokers to give bonuses on VIP accounts give a 100% bonus.
VIP account holders get bonuses like prepaid debit cards, travel benefits, access to technical and fundamental analyses, etc. They can trade innumerable Standard Lots. Thus, they get the ability to earn lots on their accounts.
These were the basic facts about the various forex account types. From one broker to another, the particular features will vary. Looking at the specific type of account that will match their circumstances before making a definitive selection is entirely dependent on the traders.