What Are Different Types of Forex Accounts for Retail Trading?
Different Forex brokers offer different account types for retail Forex trading. The classification of Forex account types can be based on the following criteria:
1) Size of trade positions.
2) Operation of the Account
Types Of Accounts Based of Lot Size
The classification of the Forex account can be on the basis of the minimum size of positions you can take. There are 4 basic account types for retail trading:
1) Standard Account with Standard Lot Size
2) Mini Account with Mini Lot Size
3) Micro Account with Micro Lot Size
4) Flexible Account with No Restriction
In the early days of Forex trading the only option available to retail Forex traders used to be “Standard Lot Size”. Standard lot size means 100,000 units of the currency. If you are trading with standard lot sizes then the minimum trading position you can take is of one standard lot i.e. 100,000 Unit. When we mentioned “minimum position size” that does not mean that with a standard lot size you can trade with 110,000 or 120,000 units or so on. You will be basically trading with 1 lot or 2 lot and so on.
For example if you are going long for EUR/USD that means you are buying Euro by selling U.S. Dollars. In case of standard lot minimum Euro you will be able to buy would be 100,000.
Mini Forex Account
Mini Forex account was the second step in the evolution of retail Forex trading. Mini accounts allow you to trade with “Mini Lot Size. A mini lot size means 10,000 units of the currency you are buying or selling. Similar to the example given under Standard Forex Account, with mini lot size your mentioned EUR/USD position would mean that you can buy minimum 10,000 Euro.
Micro Forex Account
To make the retail trading more affordable to small traders, the Micro Accounts were introduced. With Micro Account you can trade with 1 Micro lot. One Micro lot equals 1,000 Units of the currency. Taking the same example of EUR/USD it means that your one “micro lot” position would mean buying or selling 1,000 Euros.
Flexible Lot Sizes
Some Forex brokers do not have any restrictions on what size of positions you can take. You can trade only for 1 U.S. Dollar or 100,000 or more U.S. Dollars.
The Lot Sizes Vs. Margin Requirements
Please note that you home currency (account currency) or the currency you may be operating the account may be different. Than either the base currency or quote currency of the currency pair you are trading. This fact makes it important to think about the margin required for your trades and not the position size or number of units of the currency pair you are trading.
Account Types Based on the Operation of Account
|Apart from the size of the trading positions you can take for your Forex trading, another classification could be on the basis of day-today operation of your trading account.|
Self Managed Account
You are the boss, its your account and you trade according to your analysis and trading strategies. In simple terms it is a normal trading account where you make a trade decision, take a position and end up with a profit or loss.
Managed Forex Accounts
A managed Forex Account is an account where a Money Manager or Money Managers manages your account. You are just putting in the money and the trading decisions are taken by some seasoned Forex trader on your behalf. You would pay a commission for the services.
The fee structure and terms and conditions of a Forex Account managed by a money manager may differ. They may charge a fixed monthly amount of money or a share in your profits. Please note that the money manager will be like a broker and will not be sharing your losses. You will have to judge carefully about the experience, past records and terms of the services before you go for a managed account for your trading.
Mirror Trading Account
Mirror Trading is a concept in which you can replicate the trades of other Forex traders whose shown track records of success you appreciate. MirrorTrader is a Trade Mark of Tradency but the concept is offered by many brokers. This kind of trading account can be automatic where you do not interfere and can be a networking or social trading platform where you may decide to follow a trade or neglect it.
<- Go back to Forex broker section.