All of us can freely explore the forex market as the technology has advanced to the next level over the years. But only a few of us are daring enough to give it a try as the risk makes us step back. However, the risk can be converted into rewards if you are skilled enough to manage it. If we look at professional traders, they always make calculated moves by decoding the market situation and this makes them profitable. You can also achieve such success by sharpening your trading skills. But before that, you have to find the best type of forex account for yourself as there are quite a few options to consider.
Everyone can find a Forex account that fits their requirements. Even if you are not good at trading on your own, you have a chance to make money using managed forex account services. These accounts allow us to earn by investing and forex brokers offer such different types of accounts to grow their client base.
If you are aware of these options, you can also reach your true potential by making a wise choice and this blog will guide you in the process.
The Role Of A Forex Account
When you open a forex account with a broker of your choice, it becomes your gateway for accessing the decentralised market. You cannot navigate the OTC market without a trading account offered by a reliable broker. It’s easy to open a trading account, as you just need to do some KYC formalities. You are eligible to trade in the live market after depositing enough funds into the account. This account is going to be your workspace as a trader and the kind of trading environment you get there will have a strong impact on your performance and trading results.
A Closer Look at Forex Accounts
The trading conditions you get, the amount of money you pay as trading cost and even the results you get depend on the type of account you choose to trade forex. The broker and trading platform must be dependable as well. You have to tick off all of these from your checklist before signing up for an account. After all, you will be depositing your funds to the same account and you should be able to withdraw it without any hassle. Regulated brokers are the best option to ensure the security of your funds and also make sure they offer a secure payment gateway.
A regulated broker operating will be complying with the standards and rules set by the regulatory body as they are monitored by the regulator. If there is any deviation from the set standard, their licence will be revoked and thus they do their best when it comes to service quality. Most regulated brokers provide top-notch technology and a seamless trading experience on their platform. They even offer better trading conditions and there is more transparency. So, keep all of these in your mind while searching for a broker.
Different Types Of Forex Accounts
Let’s have a look at the options you can consider to kickstart your forex trading journey.
- Standard Account
A standard account is just a regular trading account where you place trades with standard lot size. A standard lot contains 100K currency units. The more lot sizes you choose, the number of currency units will also go up accordingly. Brokers offer standard accounts with different features like no commission or zero spread. So, you can check with your broker as to how many types of accounts they are offering.
- Islamic Account
Just as the name implies, Islamic accounts are used by Muslim traders who want to trade while adhering to the principles of Islamic finance. They are supposed to avoid riba or interest in any kind of transaction as per Shaira law and the swap fee in forex breaks this rule. This makes forex trading haram for Muslims when they open overnight positions. However Islamic accounts allow them to trade in a halal way by not charging swap fees on the positions held. They are also known as swap-free accounts.
- Mini Account
A mini account is just like a standard account but with 1/10th of the lot size compared to a standard account. In mini accounts, you can place orders in mini lots and one mini lot consists of 10,000 units of currency which greatly reduces the risk.
- Managed Forex Account
As stated earlier, investing in a managed forex account allows you to earn profits without trading yourself. There are 2 types of managed accounts you can invest in – MAM and PAMM accounts. Both types of accounts are managed by experienced traders with profitable trading systems, but there are some differences in their operating styles. MAM accounts provide greater control to investors as you can set some conditions for managing the risk which makes it flexible.
On the other hand, PAMM accounts are more like pooled money accounts where the funds are allocated on a percentage basis and the sharing of profits/losses is also based on the percentage of money that you have invested with a PAMM account manager. This is perfect for beginners as the trader will also make decisions about risk management but there will be less control in comparison to MAM accounts. You can choose the best one based on your preferences and knowledge level.
- Demo Account
Demo accounts are not used for actual trading as they have no connection with the live market. They just replicate the trading conditions and features that you get on a standard account but the trading process is just a simulation where virtual funds are used. Demo accounts are like a practice account for a beginner as there is no risk involved. Another use of a demo account is to test your forex strategy in real-time market conditions before trying it on an actual account.
Summary
To summarise, opening a forex account is the first step for accessing the currency market. Beginners should start by opening a free demo account before anything else as risking real money right away is not recommended in the volatile market. After demo trading, you can sign up for a standard account to trade for real. If you want to trade with smaller lot sizes, mini accounts will be a suitable option. Swap-free accounts from Halal brokers are ideal for Muslim traders and managed forex accounts are meant for those who want to invest in top traders’ strategies instead of trading themselves.
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