FX Trading Account – A Guide That Every Trader Needs to Select the Right Forex Accounts
Most people don’t realize this, but there are a number of FX trading accounts that you need to be aware of before you start to trade. This article reviews the different Forex account types and recommends the ones you need and the ones to avoid.
So why is there more than one kind of account? Well, each account has a different purpose.
Your first step is deciding on a Forex broker. There are many to choose from online. The type that you want is known as a discount broker. These companies will allow you to deposit a very small amount of money. Typically, you can start trading with a deposit of $250 to $500.
With your new broker account, you want to be sure they have a few specific features. If not, you need to keep looking.
FX Demo Account
This is exactly what it sounds like. It’s an account that you can try to see if you like the companies services. There’s no deposit required. You just need to give them your contact information. Sometimes a sales person will call you to try to get you to open a real account with them.
FX Practice Account
This is a very important feature. If the broker you currently have or are considering using doesn’t have this, you need to move on. This feature allows you to test out trading strategies with real live market data but with fake money. Don’t start out trading with real cash until you practice for awhile first. Some companies will allow you to use their demo account as a practice account indefinitely.
Micro Lots
After using the practice trading account, you will start to trade with your deposited money. When you do, you will want to start out with small amounts. Micro lots are very small. You can risk amounts from $1 to $50. You won’t make big profits but it will get you used to the feeling of trading real cash.
FX Managed Account
I suggest you avoid this type. This is a completely different than a discount broker account. Typically the deposits are much higher. Some firms will require a cash deposit of $25,000. These companies do the trading for you. You tell them your risk tolerance and they trade your money. They’ll charge you around 30% of any profits they make. You have no way to know for sure if these companies will make you money. They can blow out your account and you have absolutely no recourse.
So there you have it. All the FX trading account types you need to know about. Your next step? Determine your trading strategy and set up a practice account today!
Hector Breton’s passion is trading and discussing topics like selecting a FX trading account. Find out what he recommends as the only proven method to trade at http://www.automatedforexsystemtradingblog.com.
