Understanding Forex trading Accounts

For the retail forex trader, there is a wide variety of forex accounts to consider and choose from.  For the beginner, it is best to start with demo accounts.  These are offered by brokers, usually for free, as a way to entice prospective investors to try their platforms and trading systems. Once the new trader has tried out various demo accounts with various dealers, the next logical step would be to open a funded account.

Mini, full, and managed accounts are the most prevalent types of funded accounts. A mini account is practically the same as a regular or full account except that trading is done on smaller lots; for example, in $10,000 lots instead of $100,000. A lower mandatory initial deposit is also required. Likewise, because of the lower amount of investment, the ability to customize risk management is greater.

For a currency trader, it is important to determine first what he wants and needs to get from his funded account before making a decision on which type of account to open. A demo or a mini account, for example, is ideal for a trader who is still in the process of getting used to the broker’s system and trying to find a trading method that will work for him. On the other hand, a currency speculator who may not want to dabble in actual trading himself may opt for a managed account.

Forex Managed Trading Explained

This method involves trading of the forex account by a designated funds manager in behalf of the client. This is done in consideration for an agreed fee. Managed forex accounts can be likened to a typical bonds and equities investment account where an investment advisor is enlisted to manage the account. Fees and ROI can vary widely among various managed accounts so it is important to study your available options well before deciding to assign your account to a professional funds manager.

More on Managed Forex Accounts

Some managed accounts have more involvement from the account owner who may give instructions on which signals to watch out for and how these should be interpreted. This gives the investor a bigger responsibility in the account’s profits and losses. There are also managed account types that make use of a trading firm’s proprietary trading platforms.

It is important to remember that there’s no such thing as the perfect trading system or platform that will work for all. Experienced traders should know. You have to find out through experience which ones are compatible with your own trading style. After all, if a particular system is a guaranteed to make money, why would anyone want to share it? This is precisely why established trading firms keep their profitable trading programs under tight watch.

Author: Pavel from Admiral Markets