Forex trading is one of the most popular activities. Trading accounts are an inseparable part of brokers. There are several types of accounts that differ from each other in terms of trading conditions. In general, when choosing an account, it is necessary to consider what goal the trader is guided by or what task he sets for himself. That’s why there are numerous accounts when it comes to FX trading.
So, brokers offer their clients a huge selection of accounts: demo account, forex cent account, ECN account, Standard, Classic and swap-free account. We will have a look at each of them thoroughly below.
Forex account types
Different types of accounts on a brokerage’s website, as we have already mentioned above, serve a different purpose. Some are suited for beginners, some for professionals and an Islamic account, in particular, is oriented towards the people who practice the Muslim Faith.
A demo account is the very first type of account from which a beginner at Forex should start his work. Indeed, when trading on this account, a trader gains experience and gets all the required skills to work on financial markets in the future, while absolutely not risking his capital, because trading on this account is educational and takes place by using virtual capital.
Islamic accounts are frequently called swap Free forex trading accounts considering that they offer swap-free conditions to customers who practice the Muslim faith. According to Sharia law, some conditions in trading are unacceptable, so Forex brokers have decided to introduce a completely new type of accounts. This format is frequently available on Forex brokers’ websites.
A Forex cent account is the minimum account in Forex. Having first acquired certain trading skills on a demo account, a trader can try his hand at real trading. But you still need to start with the fact that you put money into a forex cent account. It is clear that the minimum deposit amount differs from broker to broker, but usually, it varies from one to ten dollars, which, in cents equivalent, will be credited to the account as one hundred or a thousand cents. All transactions are concluded in cents, taking into account the characteristics of the cent account selected by the trader.
Of course, there is no reason to expect high profit here, because the amount of replenishment was small, but this will be more than enough to develop your own trading strategy. In general, forex brokers also consider cent accounts to be educational, but, unlike a demo account, the psychology of a trader is changing here, who will now treat profits and losses differently, because they are already calculated in real money.
Standard and Classic accounts
These are the most common among experienced traders. Their convenience is that they have a fixed spread, which allows them to calculate the ultimate goals. For those who practice scalping, these accounts will be unprofitable, because there are delays in the execution of orders. There are other subtypes of standard accounts and each Forex broker itself decides what to offer to clients.
We can also note that Standard, Classic and ECN accounts can simultaneously be swap-free accounts, that is, they do not have swaps – a commission fee for transferring a transaction to a new trading day. This condition will attract the attention of traders who open deals for several weeks or even months. It is practically the same, that we have already mentioned above.
ECN account is convenient for those who trade intraday, opening frequent and short trades. The spread is floating here, but less than in Standard and Classic accounts. ECN accounts may not be provided on every broker’s website.
It is necessary to point out that professional traders also work on cent accounts. Trading on this type of account can take place with a lot of 0.01, which minimizes risks, provided that the requirements of money management are met. Moreover, this type of account is an excellent option for those who want to make a profit on Forex by trading on small time frames with the help of advisors or using scalping in their trading. With trading conditions on a cent account, the largest volume of 1 lot equals 100 units, which, if the price fluctuates by 1 pip in monetary terms, will amount to $10. That is, if a trader managed to make a profit of 100 pip, He would earn $1000.
If, after reading all of the above, you have not decided on the choice of an account, then feel free to open a demo account and trade on it, while gaining experience and trading skills without risking losing capital. As you gain knowledge and experience, you will be able to determine what type of account you will need in real trading. A demo account is indeed an excellent way to embark on a trading career.