How Many Types Of Forex Accounts Are There?

While kickstarting your trading journey, the first thing that you need to do is find a reliable broker with whom you can open your trading account. The broker is essential to bridging the gap between ordinary traders and the decentralised currency market which is also an OTC marketplace. The trading account will be operated through a piece of software that is designed for currency trading and it is known as a trading platform. But when it comes to account opening, you get a lot of options to choose from as different types of trading accounts are there to meet the requirements of different types of traders.
In this beginner’s guide, I will introduce you to different types of forex accounts and their features, so that you can select the best one.
- Demo Account
A Forex demo account is a type of trading account that you can open for free and trade without depositing your funds. The broker will let you trade with virtual funds and you get to try the trading platform without the risk of losing money. A demo trading account is perfect for those who are new to trading and need some hands-on practice before they are ready to risk real money in the process. You will get to learn trading in real-time market conditions and even test your strategy to see the chances of getting desired results in actual trading.
- Standard/Regular Account
A standard or regular trading account is the most popular account type that is commonly used by a lot of traders. Just as the name suggests, this is a regular account where you can place trades in standard lot size which is 1,00,000 units of base currency. You will have to meet the minimum deposit requirement set by the broker to start trading on a standard account. The orders that you place on this account will be executed in the live market and you will have to focus on risk management to make profits by limiting the potential losses.
- Mini Account
A mini account is similar to a standard account and the trades are placed with actual money. But the only difference is that you get to place trades with a mini lot size which is 10,000 currency units. This type of account is suitable for traders who want to start trading with a smaller amount of capital and risk a lesser amount for their trades. This is ideal for beginners who are afraid of losing more money if they use a standard account or just want to limit their risk per trade.
- Micro Account
A micro account is just like a mini account but here the lot size will be even smaller as you get to trade with micro lots which are 1000 currency units. This is perfect for those who want to reduce the risk further as they don’t even want to trade with mini lots. The purpose of a micro account is to risk only a small amount of money but you also get to see the results in a real account.
- Cent Account
Just as the name implies, the cent account is a type of trading account where the money is measured in cents instead of dollars. This account is also known as a nano account as they allow you to trade with nano lots which are smaller than micro lots. Suppose, you deposit $10 into a cent account, that means you will get to place trades with 1000 cents as $1 is 100 cents. The nano lot is the smallest lot size that you can trade with in the forex market and the goal is to minimise the risk.
- Swap Free Account / Islamic Account
A swap or rollover fee can be described as the cost of keeping an overnight trade position open and it is charged based on the interest rate differential between two currencies in a pair. But Muslim traders will have to open a swap-free account as any kind of interest-based dealing is Haram or prohibited as per the rules of Islamic finance. Hence, brokers offer this account type where no rollover fee is charged and you can keep the trades running for an extended duration by paying a flat rate admin fee instead.
- ECN Account
ECN account is a type of account where trades are executed through an Electronic Communication Network and this is especially suitable for scalpers and day traders as the execution of trades is very fast and the spreads are tighter than other accounts. These types of accounts are offered by ECN brokers who operate differently than market maker brokers. They are more transparent and cost-effective which makes them a popular choice among forex traders. ECN brokers often have access to deep liquidity pools which allows you to enter and exit trades at best prices with greater ease.
- Straight Through Processing (STP) Account
An STP account is a type of account where the trades are executed without any kind of dealing desk interruption from the broker. The same system is followed in ECN accounts but here the term STP only states that the orders are processed by transferring them to liquidity providers and the broker is not directly involved in the execution of trades. Market Maker brokers will not be offering STP accounts as they act as counterparties for executing the orders that are placed on their platform and they earn from the spreads hence their spreads can be higher.
- PAMM Account
PAMM is a short form for Percentage Allocation Management Module and it is a type of managed forex account where a professional trader will be trading on your behalf and you will only be playing the role of an investor who deposits funds into a PAMM account. These types of accounts are perfect for those who want to trade passively. The profits and losses will be shared among the account manager and investors on a percentage allocation basis and you can manage the risk by diversifying your investments across different account managers following distinct strategies.
- MAM Account
MAM account is also a type of managed forex account and it stands for Multi Account Manager. It is similar to a PAMM account but here the investors can set criteria for risk management as they get to allocate funds differently and specify the conditions for trading based on their risk tolerance. The MAM account manager will be managing the trading activities of multiple investor accounts but the investors get more flexibility in comparison to PAMM accounts.
- Copy Trading Account
The last account type that I want to talk about is a copy trading account where you simply copy the trade positions of an expert trader. You just need to find a suitable platform and choose a trader to copy based on their performance and the process of copy trading will be fully automated.
So, these are the 11 types of forex accounts and this means that there is a suitable account type for every trader. You just have to find a broker that offers the type of account you want and sign up with them.