Forex trading is currently one of the most popular way to invest and make money online. However, choosing a forex account type can sometimes be hard decision to make, especially for beginners. It gets even harder when there’s nothing or no one to serve as a guide in making a selection. Well, this article is available to make this easy for you.

Given its technicalities and risky market nature, one would have thought only a few people would summon enough impetus to navigate the complex forex market. Time and events however has proven to the contrary. In spite of the difficulties and complexities inherent in the forex market, people are still navigating the market by the day. Not just that, but also making some good fortunes for themselves from this very same forex market.

This article is particularly intended to explore the various forex account types and further help you understand the differences between them, guiding you through making a selection of any one of them. Let’s now fully delve into the crux of the matter –forex account types.

Here are some of the most common forex account types:

  • Demo account
  • Standard Account
  • Micro Account
  • Managed Account
  • Islamic Account
Contents
1 Demo Account
2 Standard Account
3 Micro Account
4 Managed Account
5 Islamic Account
6 Choosing a Forex Account Type
7 Frequently Asked Questions

Demo Account

A demo forex account type is a simulated trading account that is offered by brokers that allow traders to practice forex trading in a risk-free environment. A demo account is also referred to as a practice account and is mostly used for learning how to trade the forex market without being exposed to real time risks associated with the market. It is quite identical to the standard forex account and mimics real market conditions using virtual currency, enabling traders to experience trading strategies, market dynamics and platform features without necessarily being exposed to financial risks in real time.

Some of the benefits of using a demo forex account type include the following:

  1. It helps traders gain proficiency in using features and tools in the trading platform, thereby making their transition to a live account smoother and more efficient.
  2. It offers traders practical experience in executing trades, analyzing charts and using trading tools.       

   3.  The absence of financial risk offers traders trading experience without the psychological stress           associated with real time trading.

   4. Some demo accounts offer traders detailed reports and analytics to help them evaluate their             trading performances.

 Standard Account

The standard forex account type is the most common type of forex account offered by forex brokers to traders. They provide standard trading conditions with typical contract sizes and leverage. Standard accounts are designed for traders with good understanding of the forex market and allows traders to trade standard lots of currency pairs. Each standard lot in a standard account represents 100,000 units of the base currency, and makes it suitable for the more experienced traders seeking greater exposure and returns.

Below are some of the benefits of the standard forex account type:

  1. Standard accounts mostly offer traders advanced trading features and tools which include technical indicators, sophisticated charting packages and automated trading options which further enhance the ability of the traders to analyze and execute trades.
  2. Standard accounts also offer traders the availability of higher leverage which allows them to control larger positions with relatively smaller amount of capital.

   3. Due to higher contract sizes, standard accounts offers traders the potential of making higher             profits for each trade, particularly those with strong understanding of movements in the market.

   4. Due to larger trade sizes and increased market activities, standard accounts offer better                     liquidity, which can further lead to a more efficient execution.    

Micro Account

Micro forex accounts are particularly ideal for traders who want to trade with very small amount of capital and also have more control over their risk management. In a micro account, each micro lot represents 1000 units of the base currency and also comes with lower minimum deposit requirements which also make it an ideal choice for beginners.

The benefits of the micro account include the following:

  1. Micro accounts typically require a smaller initial deposit compared to the standard account. This makes it easier for new traders to start trading without very substantial capital.
  2. The use of micro lots helps in limiting potential losses and managing risks more efficiently.

   3. Many brokers offer lower spreads and commissions on micro accounts, making it more cost               effective to trade smaller positions.

 Managed Account

For a managed forex account type, a professional money manager trades and manages the account on behalf of a client. In this case, the account is funded by the investor and trading decisions are transferred to and handled by a professional trader on behalf of the investor. Put differently, for a managed account, the investor delegates discretionary authority to the manager to make trading decisions, execute trades and manage the account’s portfolio based on mutually agreed strategies and objectives by the investor and the account manager.

Below are some of the benefits of a managed account:

  1. Managed accounts are overseen by experienced professionals who have deep understanding of the forex market, and whose expertise can yield better trading outcomes for their clients.
  2. Experienced account managers employ various risk management strategies to prevent the impact of significant losses on the investment.

   3. Managed accounts have the potential of achieving higher returns compared to some self                     managed accounts.

Islamic Account

The is also known as a swap-free account. It is sharia-compliant as it is designed to adhere to the principles of Islamic finance. Consequently, this type of account prohibits certain financial activities including earning or paying interests, and also engaging in speculative trading practices that are deemed excessive. Islamic accounts ensure that their users participate in the forex market in a manner consistent with the Islamic religious beliefs.

Some of the benefits of the Islamic account:

  1. Islamic forex accounts prohibit swap fees thereby making the cost of holding a position transparent and also consistent with sharia laws.
  2. With Islamic accounts, there is provision of a clear structure for fees and trading costs, which reduces the potentials for hidden charges or excessive speculation.

   3. These accounts align with Islamic principles of ethical trading which fosters fair and transparent         business practices.

Choosing a Forex Account Type

Just as there are different types of forex traders, so are there different forex account types. They are all designed to meet individual specifications and needs. Beginners, market experts and investors can get an account to suit their level. Choosing the right forex account type is essential for trading success in the trading market.

Frequently Asked Questions

 Which is the best forex account type?

  • The best forex account type would vary based on individual preferences and experience in the forex market.  

Which is the best forex account type for beginners?

  •  The demo forex account can help beginners gather experience about the forex market, without  necessarily being exposed to risks associated with forex trading in real time. Also, micro accounts provide for smaller trade sizes and consequently have smaller account sizes and margin requirements. Micro accounts are great options for beginners in forex trading.   

Can I have more than one forex accounts?

  • Yes, it is possible to have more than one forex account.