Working on the international currency market inevitably begins with the fact that a future trader has to open a Forex trading account with a chosen DC. However, this is not always so easy for beginners, as the brokers themselves claim, because often up to 5-8 options can be offered to choose from. Yes, in some cases, the choice is limited due to the volume of the deposit, but who said that it would be more correct to choose an account only on this basis and, in general, what should you pay attention to?
In order not to understand these issues and consciously approach the choice, clearly understanding what exactly should be processed and where to transfer money, you should study what Forex trading accounts are now. It should be noted that some earning strategies will be completely ineffective if you choose the wrong type of account in the foreign exchange market, so it is highly discouraged to ignore these points.
Demo account
Now it is almost impossible to find a broker who would not offer to register a demo account. As its name implies, this type of account has been created to familiarize oneself with Forex and work on it is conducted not with real, but with virtual funds. To register this type, you do not need to indicate real data or invest your money, you just need to download the trading terminal of the broker you like and select a demo at the entrance, almost instantly gaining access to trading.
The training account receives accurate quotes in real time, the terminal has no limitations in functionality, therefore, without a doubt, you should start mastering Forex and test your favorite strategies right here. The only thing that the demo cannot give is a sense of the reality of what is happening and the attitude to virtual money will always be calm, while when switching to a real Forex account, emotions will actively interfere in trading.
Classic account
Only a demo account can be used as a training account, all other types are real. The first of them is to highlight the Classic (Classic) account, which almost every broker also has. Sometimes it is also called "intrakitchen", and the broker can still sound like Standard (Standard). The title is a bit offensive, but nevertheless conveys the essence well. As a rule, to open such a Forex trading account, you will need a minimum amount of money - in the range of 1-50 USD. Collecting such an amount is not at all a problem, so usually beginners get acquainted with the real work in the foreign exchange market with the help of Classic.
Now a little about the mechanism of operation. Trading operations on a classic account that a trader makes are not displayed on the real interbank market! That is, other clients of the broker or the DC itself are the counterparties in each transaction. Accordingly, with this type of account, there is almost always a conflict of interest between the broker and the trader, and, in addition, during periods of high volatility, a request to open a trade may be rejected with the message “No price” or “Invalid prices”. This phenomenon is called a requote, and it appears due to the fact that the broker to whom the trader has sent the order for price execution, for technical reasons, may no longer have such prices at the time of approval of the request, since quotes may change during a period of high volatility on Forex by a large number of points in a split second.
But the classic account also has positive aspects. It usually has a high level of leverage, the largest number of instruments available for trading with clear and fixed, but significant, spreads that do not depend on market conditions. Due to its peculiarities, the Classic Account is suitable for beginners who are aiming at a leisurely medium-term and long-term trading policy and do not have large deposits. However, you should not use scalping or news trading strategies on it, as they will simply be ineffective.
STP and ECN
With STP and ECN, all trader's trading operations are already brought to the real market. Accordingly, “Market Execution” is written in the “Execution type” field, that is, trade by the market. For comparison, the Classic account in this field would have an Instant Execution mark - internal execution. The advantage of working on such accounts is the absence of a conflict of interest between the broker and the trader, since it becomes profitable for the company that its clients earn. But at the same time, a trader will need a good start-up capital to enter Forex, the opening of an account with most DCs occurs with a deposit of 500 USD and above, although many immediately set a minimum bar of 1000 USD. Nevertheless, with the current competition, there are already more loyal conditions.
In addition, when dealing with the best liquidity providers, Forex brokers usually manage to provide their clients with very low spreads. For example, for popular pairs such as EUR / USD, the spread can be 0.1-0.2 pips, while for a Classic account it will be 2 pips. Also, during market execution, the likelihood of requotes appearing is excluded, although a trader can never be sure what exactly his order will be executed on. For example, during the news release on the US, a currency speculator buys the USD / JPY pair at 120.00. But, while the order travels the way to the broker, and from him to the liquidity provider executing it, it will take some time, during which the quotes will pass a certain number of points, and as a result, the order may be executed not at 120.00, but with a deviation of 10 , 20 or even more points.
Nevertheless, these account types exclude the possibility of requotes and are great for trading using absolutely any strategy, the main thing is to exercise reasonable caution when the market is highly volatile.
Difference between STP and ECN
Many do not understand the difference between ECN and STP, because the execution scheme is almost the same, but you need to choose one Forex trading account and you should understand the border between these types. With STP, the liquidity provider closes the deal, that is, if a trader wants to sell euros against the dollar, then some large bank acts as a second party and buys euros from the client at the proposed price for US dollars.
In the case of ECN, each trader is himself a liquidity provider and the system almost instantly brings together a huge number of participants, executing their orders at the best prices. This is very convenient if, for example, one client of a Forex broker sells a currency pair, and the other wants to buy it, then the order, instead of being sent to the liquidity provider, is immediately executed between the two counterparties. It is very convenient, fast and often very useful as both traders get a good price.
Profitability of the trading system depends not only on the thoroughness of the approach to its development, but also on the reliability of the broker. The reliability of a broker should be understood primarily as the level of its technical equipment. Indeed, many types of strategies (for example, scalping) are highly dependent on the level of infrastructure quality. Namely - on the speed of order execution. Based on this, the set of brokerage accounts of almost all forex companies can be divided into 3 main groups:· Accounts for learning to trade; · Accounts for professional trading without strict requirements for the speed of execution of client orders; · Accounts with a high speed of execution of client orders (the most striking example of the need to use an account of this type is algorithmic trading - trading using automated trading systems). It should be noted that this classification is approximate, and, in turn, each of the groups of accounts can be divided into subgroups (for example, accounts that provide a high speed of execution of client orders can be divided into accounts on which the withdrawal of a client order is organized directly to the liquidity provider, and into accounts using the "ECN" model, which implies the possibility of combining a client's order with a similar order of another client of the same broker). Here, however, we will not focus on such details, but will consider each of the groups of accounts from the point of view of rationality in the context of the trading system used and the level of professional training of the trader. Accounts for learning to trade. This type of account is for educational purposes only. You can also trade on them, but only if the deposit is small. Accounts of this group can be divided into 2 types: · Demo accounts; · Cent accounts. Demo accounts. A demo account is an account with virtual money. It is intended primarily to familiarize yourself with the functionality of the trading platform. When trading on this type of account, a beginner should first of all learn not to confuse the Buy and Sell buttons, figuratively speaking. It is not recommended to master and test trading strategies on this type of account, if, again, we are talking about learning to trade. Of course, a professional uses a demo account quite often, especially for the initial testing of a strategy or a trading robot. The latter, by the way, can be checked in the tester, but the accuracy of such testing in most cases leaves much to be desired. This is where the demo account comes in. It is not recommended for a beginner trader to sit for a long time on this type of account - after all, virtual money does not at all contribute to the development of responsibility for the safety of capital, which is very much lacking in many traders. 
Cent accounts. The main type of account for direct training in trading. Many traders (and often quite experienced ones) have an erroneous opinion about the usefulness of this type of account and the possibility of full-fledged trading on it. This is fundamentally wrong. Firstly, cent accounts, therefore, are named as such, since, as a rule, they have a 100 times smaller lot size. It is understood that the trader will not trade large volumes on this type of account. The size of the deposit on this type of account is also usually limited. Usually - in the amount of a couple of thousand dollars. Secondly. This type of account, as a rule, does not provide for the withdrawal of client transactions to the liquidity provider. In other words, the trader's request remains with the broker. Here it is performed. For many companies, this is indicated in plain text on the website in the section describing this type of account. Accordingly, it is simply impossible to trade professionally on this type of account. Due to the unavailability of the withdrawal of trader's trade orders to the liquidity provider, by the way, these types of accounts have strict restrictions on the size of the trading deposit. Any novice trader should understand that the period of his use of a cent account should be limited to the period of his entry into a break-even trade. After receiving the first profits, it is advisable to transfer funds to a full-fledged trading account. Accounts for professional trading without strict requirements for the speed of execution of client orders (accounts with brokerage dealing). This is the main type of accounts provided by forex brokers. Positions on accounts of this type are overlapped (hedged, as forex brokers themselves like to say) at liquidity providers. Accounts of this type also usually do not have direct access to the interbank market, but for many types of strategies, for example, medium-term ones, this is not required. Usually, the broker will display only the uncovered part of client positions on the liquidity provider. For most traders, both beginners and professionals, this type of account will be more than enough. The statistics about 95% of traders losing money allows the remaining 5% and brokers to be profitable, contrary to popular belief about the "inferiority" of this type of account. Earning traders consistently receive income from trading on accounts of this type. Summarize: Brokerage dealing accounts are suitable for most manual traders and there are no restrictions on trading style. Unless, some brokers will not allow scalping trading on this type of accounts. But that's what NDD accounts are for. We smoothly approached types of accounts with high execution speed client orders and having access to liquidity providers (NDD - accounts). NDD - No Dealing Desk, accounts where trade orders are sent directly to liquidity providers, bypassing broker dealing. This means that in this case the broker only provides you with the technical ability to withdraw your order directly to the liquidity provider or ECN. This type of accounts can be divided into 2 main subtypes: · STP - accounts; · ECN - accounts. STP - accounts. STP (Straight Through Processing) is a system of end-to-end sending of client orders to liquidity providers. As a rule, the system provides for the selection of the best execution price for a client order. However, the client's order is still executed, usually at a slightly worse price compared to the price provided by the liquidity provider. With this small markup, the broker earns a few pips. As a rule, there is no commission on this type of account. The spread on this type of account is usually floating and has an average value. But it is still less than on accounts with a fixed spread. This type of account represents the best compromise between spread and commission. ECN - accounts. This type of accounts is the most professional one, as it most fully implements the exchange principle of price formation. ECN (Electronic Communications Network) is a system that allows you to combine customer requests with each other. Just like it happens on any centralized exchange platform. Usually, a bridge is connected to the broker's ECN, which aggregates the liquidity of many liquidity providers. Thus, a client trading via ECN can receive the execution of his order either directly to the ECN broker (which guarantees a very low spread), or the order will be executed by the liquidity provider who offered the best price. As a rule, an ECN account assumes a fixed commission per transaction. Therefore, it is worth trading on this type of account only if the spread is very important for you. When choosing a Forex account type, you should know that this is no less important decision than choosing a dealing center. The efficiency of work in the market depends on the type of account, because each of them provides individual conditions for trading. And not all of these conditions are suitable for the trading tactics used by the trader or other tasks he solves.
Forex training account types
First of all, practice accounts include demo Forex account type... It is also called a demo account or virtual account. It is from such an account that almost all traders in the international currency market usually start working. Everything here is real, like on a real account, the only difference is virtual funds. By trading on such an account, a trader gains the necessary experience with a zero degree of risk.
The training type can also include cent account... They switch to it over time, after gaining some experience. The size of the deposit of cent accounts is 1-10 dollars, which are credited in cents, and all transactions are also conducted in cents. The minimum volume is 0.01 lot. Using these types of Forex accounts, a trader gets used to working with real money, gains the skill of psychological stability and learns not to react sharply and emotionally to losses. At the same time, a cent account is capable of generating real profits. The maximum volume on such accounts is 100 units. If the price moves 1 point when opening a deal with the maximum volume, it will amount to $ 10. Therefore, a profit of 100 pips will allow you to earn $ 1000.
The most popular types of Forex accounts
One of the most common among traders is the Standard account, which is also called the classic Classic.
It attracts with a fixed spread size, which makes it easier to calculate the possible profit. The minimum trading volume is 0.01 lot. Therefore, a 1 pip price movement results in a gain or loss of $ 0.1. It is convenient to trade on such an account on time intervals from H1 hour to D1 day. Stop loss and take profit can be set both when opening an order and after. The negative aspect of such an account is that during the active work of the market, some brokers experience freezes and slippages.
Scalping traders, as well as those who like to open a lot of trades during the day, prefer to work on ECN accounts. On such an account, the spread is constantly changing, but it is lower than on a standard one. In addition to the spread, traders have to pay a commission for opening trades. Another feature is fast and timely execution of orders, in contrast to standard accounts. The disadvantages include the impossibility of placing a stop loss and take profit when opening a deal.
Another type of account is swap-free. Working on such an account, a trader does not pay a swap - a commission for transferring a transaction to the next day. Such accounts are preferred by professionals who trade on large timeframes and keep their trades open for several days, and sometimes weeks. It is pointless to trade on swap-free accounts during the day, making many transactions - for each open order, the broker charges a commission, thereby compensating for the absence of a swap.
Forex investment account types
On Forex, there are two types of account types related to investment:
- investment PAMM accounts;
- managed PAMM accounts.
In fact, this is the same type of account, only in the first case, a market participant who does not want to trade independently invests in a PAMM account. The trader working on this account, receiving profit, divides it in proportion to the invested funds, leaving himself a certain percentage. In the second case, a trader, not having a sufficiently large capital, becomes a manager of other people's funds (investments) entrusted to him. Holding a certain percentage, he distributes the rest of the profit among the investors.
Depending on the current goals and experience in the international currency market, you can choose the account that best suits your individual requirements.
Sooner or later, any person interested in currency speculation will face the problem of choosing a suitable account. This is not such an easy task as it might seem at first glance.
When choosing a suitable account, you need to take into account such parameters as: trading style, preferred timeframe, the amount of funds that a trader can afford to allocate for a deposit. Therefore, it is necessary at least in general terms to have an idea of what types of forex accounts can be found.
In general, the following types of accounts can be distinguished:
- a demo account, this is what DCs mean when they offer beginners to try real trading without the risk of losing money;
- cent accounts - trading is done with real money. A deposit of, for example, $ 50 will look in this case as 5000 units of the base currency. Accordingly, the price of a point changes, that is, a trader can trade more flexibly;
- ordinary, classic or standard accounts - they are chosen by traders whose deposit ranges from several hundred to several thousand dollars;
- ECN accounts are an ideal choice for scalping and pipsing lovers;
- Swap-free accounts - no fee is charged for position transfer;
- PAMM accounts (managed and investment).
In fact, there is no perfect account type, each one is good for specific tasks. For example, a demo account allows beginners to familiarize themselves with trading without risking their own money. The opportunity to open such an account is provided by all DCs without exception.
In theory, such trading is no different from trading with real money, but here psychology comes to the fore. Quite often, a person shows excellent results on a demo account, but they cannot achieve the same with real money. The main reason is excessive emotionality.
The main advantage of cent accounts is the possibility of flexible money management, which is especially important for traders who have recently started trading and cannot afford a large deposit. The price of 1 point, depending on whether 4 or 5 digits are displayed after the decimal point, will be 1 and 0.1 cents, respectively. An online calculator can be used to calculate the price of an item.
Cent accounts are ideal for testing new trading strategies or indicators. In a sense, it is even better to immediately start trading on a cent account using a small deposit of $ 50 - 100. This will not cause significant losses, but the trader will risk real money, which means he will experience the necessary emotions and learn to restrain them.
Accounts for experienced traders
A standard account (in some DCs it can be called classic) is chosen by traders who are confident in their abilities and use a calm trading style. In this case, the deposit usually ranges from several hundred to several thousand dollars. Unlike a demo account, there may be slight delays when making a deal, but since trading is carried out most often on timeframes from h1, this does not affect the result.
The vast majority of DCs for such accounts provide a fixed spread, the ability to change the leverage is also provided. The speed of order execution depends, as a rule, on the activity in the market.
The main difference between ECN accounts is the floating spread (it can even be equal to 0) and the commission for each trade. The price at which the transaction is carried out is not determined by the broker, but based on the coincidence of the offer on the part of the seller and the interest of the buyer. Such accounts are recommended for a large number of intraday transactions. Also, these types of forex accounts can be recommended for trading scalping and piping advisors.
Swap-free accounts will be useful for those who like to trade on the daily timeframe. Their main advantage is that no swap is charged when a position is rolled over to the next day. It doesn't matter for day trading.
How to work with PAMM accounts
Such accounts can be used in two cases:
- the trader has money, but he either does not have the opportunity to trade regularly, or is simply not confident in his abilities. In this case, it makes sense to pay attention to PAMM investment accounts, in this case a professional will work with money, for this you will have to pay a certain percentage of the profit;
- if a person is confident in his abilities, he can create a manage PAMM account and attract more and more new investors. As a result, both parties benefit - the trader works with a lot of capital, and, accordingly, the profit is higher. Investors, however, without making any effort, also receive dividends.
However, the main difficulty lies in choosing a really competent PAMM account manager. To do this, on the site of many DCs there is a rating of popular PAMM accounts. When choosing, attention should be paid not only to profit (although this is also important). You should carefully study the trading style, drawdowns, it is desirable that the PAMM account exists not for 1-2 weeks, but at least for several months
Different types of forex accounts can confuse a novice trader and the choice may not always be successful. In order not to be mistaken, you need to follow these recommendations:
- a demo is best suited for a beginner trader, and it is better to use a cent account. Everyone will find a few dollars to open a cent account, but from the point of view of developing discipline, a cent account is preferable;
- for confident traders, classic accounts are suitable, although if scalping or pipsing is preferred, then it is better to choose an ECN account;
- PAMM investing is ideal for a profitable investment of money. The principle of operation is almost the same as in a bank, but with a successful choice of a manager, the profit is incomparably higher. The risk, of course, is also much higher than when opening a bank account.
A trader may also come across accounts that are positioned by DCs as the choice of professionals and the PRO prefix flaunts in front of them. In fact, these types of forex accounts are not very different from the classic ones. To open a PRO account, a larger deposit is required, and DC can also guarantee a shorter execution time and other minor benefits. But this does not have a strong impact on trade.
There are also some kind of subspecies of the usual types of accounts, in which the DC introduces various changes (sometimes not entirely logical). For example, Alpari offers to open an ECN New account, while there are no commissions on it, but the spread is increased, that is, the very meaning of opening such an account is lost. In any case, before opening an account, it does not hurt to carefully study the trading conditions on it. A source:
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The next step is to open a cent account. This is already working with real money, but at the same time we can talk about the possibility of trading in small amounts. As a rule, they do not earn much on such deposits, but to gain experience in trading with real money, cent deposits are perfect.
The standard account could have already been skipped. It makes sense to work with this type of deposit, if only there is not enough money for ECN or there are other distinctive features of ECN that do not suit you.
All the same, standard deposits are already morally outdated, giving way to modern, fast, more favorable ECN trading conditions.
PAMM remains unrivaled when it comes to interactions between traders and investors. At the moment, perhaps, there is no more convenient, safe and reliable way of cooperation between traders and investors on Forex. PAMM systems have been tested in operation for years by different brokerage companies.
Segregated accounts are rarely used by common foreign exchange speculators. The minimum deposit required to start working with this option is very high. Not every trader is able to put, for example, $ 100k into his trading account. In any case, this is an option for those who want to secure their savings as much as possible and at the same time have a tidy sum of money.
Now we can say with confidence that all the main Forex trading accounts listed and disassembled. Take your time to choose ECN or PAMM if you don't have a lot of trading experience yet. It is better to start with demo accounts and cent deposits, and only then select more serious options.
