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About Forex Accounts
Forex accounts allow you to trade currencies real time. They come in different contract sizes and offer different trading conditions, which you can adapt to your investment goals and trading strategies.
Exact specifications for trading accounts vary according to brokers. What you need to keep in view is that however attractive features a particular trading account may offer, it is essential that it is provided by a reliable broker. Reliable is a keyword in the forex business: it refers to the fact that your broker is regulated and provides its services with full business transparency. This guarantees 100% execution of orders, no re-quotes, no rejection of orders, no negative balance, and investor protection.
Forex Account Types
Basically, we can distinguish between two main account types: demo accounts and real trading accounts.
If you are just starting to trade forex, a demo account is a good choice. It has the great advantage to simulate all the functions of a real trading account, and it allows you to conduct trading operations under real market conditions. The only exception is that a demo account is funded with virtual currency, so your gains and losses are also simulated.
With a demo account you can follow the real-time market changes and adapt your trading strategies accordingly, learn how to place orders to buy and sell, and see what the results would be if you did the same with a real trading account. While demo trading allows you to improve your skills very quickly and risk-free, there are two aspects that they can’t simulate: the execution time for buy and sell orders, and trading psychology.
Because demo accounts simulate results, order execution time may be relatively fast – even faster than having the same order executed on a real account. In this sense, the results achieved may be over-optimistic. The same goes for trading psychology. Investing virtual funds, even if under real-time market conditions, does not equal with investing real money. Psychologically speaking, this affects your trading decisions, as well as your reaction to virtual gains and losses.
Real Trading Accounts
To start generating more significant profits, a micro lot account can be a good choice. Micro lot trading accounts typically operate with account balances between USD 1,000 and USD 10,000 and allow you to trade with a fraction of a standard lot (i.e. USD 100,000 of any currency of your choice). With the reasonable use of your initial deposit and some leverage you can gain considerable profits on a micro lot account.
Larger forex accounts may include the mini and the standard account. Mini accounts are 10% the value of standard accounts, which means that they are 10,000 unit contracts, while standard accounts are 100,000 unit contracts. For instance, 1 trade of 1 EUR/USD mini lot is a USD 10,000 trade, while a standard lot is USD 100,000, or more.
Different brokers use different names for trading accounts, offering different trading conditions for each. Always make sure to check these details before you start trading with a real account.
