Types of Forex Trading Accounts

The trading of foreign currencies on the Forex market was once the domain of large financial institutions, professional managers of investments funds and wealthy individuals. However, this has changed dramatically in recent years with the advent of online Forex brokers. These brokers have opened up the Forex market to anyone who has a computer, internet access and the desire to buy and sell foreign currencies. Individual traders now have access to the most actively traded money market from the comfort of their own home.

Anyone who wants to try online Forex trading needs the services of an online Forex broker to carry out their transactions for them. There is a variety of online Forex brokers that you can use for your online trading, and choosing the right one is not a decision that should be rushed into. We have compiled a list of the best online Forex brokers which all come highly recommended and it is well worth looking into those brokers. You should also be aware that there are a number of different types of Forex trading accounts that you can open and use for your online Forex trading. Below we provide some further information on each of the different types of online Forex trading accounts and how they work.

Demo Forex Trading Accounts

It can often be a good idea for those completely new to trading Forex online to set up a demo trading account in the first instance. Demo accounts are also referred to as practice accounts and are basically designed to allow you to get used to handling Forex trades without actually putting any real money on the line. You may be familiar with the term paper trading; this is where people would record hypothetical trades that they would make on paper and then study to results to see how effective their trading was.

Using a demo Forex trading account is a more advanced way of paper trading where you actually get to use the trading platform of your Forex broker and get a real feel for how trades are entered. This can be a great way to build your confidence and learn exactly how things work when you are new to online Forex trading. Even once you have been trading for a while, a demo account can also be useful for trying out new strategies and trading systems and analysing results before putting them into practice for real.

Managed Forex Trading Accounts

A managed Forex trading account is also a good option for inexperienced Forex traders, or for those that do not have the required time to dedicate to their trading. When you have a managed Forex trading account you will be assigned a manager that trades your account on your behalf. You will need to have funds in your account, and your manager will use those funds to make trades for you. A managed Forex trading account is very similar to employing a full service broker or investment advisor to make investments in stocks and other equities.

The returns you can expect from a managed Forex trading account can vary dramatically from one broker to the next so if you are looking to open this kind of account then it pays to do some significant research. There will generally be some kind of fixed fees for this type of Forex account in addition to a commission charged on any profits returned. The fees and commissions will also vary between different online Forex brokers and the risks involved with this type of account are usually relatively low.

Mini Forex Trading Accounts

A mini Forex trading account is particularly suitable for if you want to make your own decisions on your trades but don’t feel comfortable in risking large sums of money. With a mini Forex trading account you will need to deposit funds, choose which trades you want to make and your broker will then execute those trades for you. The benefits of a mini Forex trading account is that you can make smaller deposits than you be required to with a standard account, meaning you don’t have to put as much money at risk.

With a mini Forex trading account there will also be smaller minimums for the size of trades you make and lower margin requirements. They will often come with some form of basic tools for educational and analytical purposes. Mini Forex trading accounts can be ideal if you are relatively new to trading Forex online or if you wish to try out a new Forex broker.

Standard Forex Trading Accounts

Standard Forex trading accounts are probably the most widely used form of trading account among online Forex traders that have a bit of experience behind them. There is not a huge amount of practical difference between a mini trading account and a standard account, but there will tend to be higher minimum deposits and the minimum value for trades will be higher too. Generally speaking, a standard Forex trading account will also offer a bigger range of more sophisticated tools and features than the more basic mini Forex trading accounts.

Automated Forex Trading Accounts

An automated Forex trading account, as the name suggests, allows for automatic trading. Basically, you would need to establish certain parameters that would trigger a trade and when those parameters are met then a trade is executed. There is various software and tools that can assist with automated Forex trading account, but it is not really a substitute for doing your own research and analysis and making your own decisions.