Selecting a Proper Forex Trading Account
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Usually everyone talks about making a right choice of a broker when it comes to FX trading. This is certainly true, your choice of a broker is vital. However, selecting the most fitting trading account can be, sometimes, even more important. In this article, we are going to take a look at the main reason behind trading accounts differentiation, their regular types and main items to keep an eye on when choosing your account.
Why does the differentiation exist?
Typically, a broker prefers to design its trading accounts in a certain way, making the best services accessible only by the traders with the largest capital. Look at this as you would look at a car industry. You can easily purchase a Honda Civic for a fair amount of money, but you can also get a brand new Honda NSX for a more significant sum. In both cases, you would be driving a Honda, yet the later model is more likely to get you to your destination faster.
The same goes for FX trading accounts, when depositing $500 you will be trading with Broker XYZ. But depositing $10,000 or more with Broker XYZ will get you better conditions, nicer service and so on.
So which types of trading accounts are there?
The variety of trading accounts is solely up to the broker. There are companies that believe in “one-size-fits-all”, hence such brokers can offer one and only one account to their clients. There are also brokers that have 5 or more accounts within their offer. Below we have highlighted the main types of trading accounts that exist.
These have been quite popular some time ago and they are fading now. The main idea behind cent accounts is that the deposit is calculated in US cents instead of US dollars. In other words, a cent account with a deposit level of $1000 would mean that a person has deposited only $10.
There are two main purposes for these accounts - testing of automated trading systems without committing too much funds and a simple level up from a demo account for the beginners.
The main attribute of cent accounts is simple - very low minimum deposit requirements. Typically, such accounts do not come with any extra benefits.
It is not always possible for a broker to integrate its payment systems so well that all of the available trading platforms extract the balance from a single ledger. This is why a broker will often have platform-specific accounts within its products.
The main feature of these accounts is the provision of your desired platform. It is quite possible to see brokers offering a specific account for MetaTrader 5 platform. However, this is not really a separate product, but rather a work-around.
Still, brokers often are more eager to let clients trade on one specific platform and, for this reason, they will be adding extra bonuses, tighter spreads or lower commissions for this software.
Conversely, a broker might want to differentiate a certain platform and make it accessible only by the professionals. This is often the case with larger brokers that set a minimum deposit of around $10,000 for the accounts that come with premium, usually in-house developed, software.
Same as cent accounts, these have been quite popular but are fading now. Mostly, the brokers with a subsequent market share in Russian & CIS countries offer VIP accounts. The main idea of such account was the provision of various extra services. They could include an account manager that is available 24/7 via a dedicated phone line, lowest possible spreads and commissions, personalized analytics or even such gifts as iPads and iPhones.
A broker was starting to treat its clients as VIPs after a deposit of some $10,000-$50,000 has been made. However, most of the benefits of these accounts are not so much useful for professional traders.
A broker will often have just a standard account on its offer. This account would usually come with a low minimum deposit requirement and would not contain any extras. In simple words, this accounts is nearly the same as a cent account, just the deposit is measured in dollar value.
These accounts would usually come with an average offer in terms of spreads and commissions, instant execution and a wide range of trading instruments.
These types of accounts are very common among the brokers too. The main idea behind Pro accounts is to offer superior trading conditions, mostly on the currency pairs. Typically, a broker will be offering market execution (NDD, ECN) for its Pro accounts. Also, the spreads tend to be much tighter and the commissions much lower when compared to regular accounts. However, these accounts are slightly less accessible too. On average, a minimum deposit for a Pro account would begin at around $1,000.
Once you have chosen your broker, it is definitely a right idea to choose a proper type of a trading account. Ideally, you should look for the accounts that come without any dealing desk interference. Then, you need to figure out how much funds you are willing to deposit, as not every account will be accessible to you. For example, if you check Admiral Markets account types, you will see that two out of its three accounts are available for a deposit of $1,000 or more. Finally, check the instruments you are planning to trade and their conditions for each of the available account types.