Forex trading takes place on sophisticated trading platforms with feature-rich functionality and real-time data. Many different types of forex accounts are available to traders, based on personal requirements. Forex trading is possible on PC, Mac and mobile devices, with browser-based platforms and downloadable trading platforms too. Forex companies are a dime a dozen, but only a handful of top-tier companies operate in this competitive space.
Traders need to conduct the requisite research to understand the merits of Forex trading brokerages. Forex trading platforms are another important area to consider, and in this vein it’s important to weigh the pros and cons of different types platforms like MetaTrader4 and MetaTrader5. As one might expect, your chosen Forex trading platform must offer up-to-the-second pricing on different forex pairs. Anything less than real-time data can jeopardize your profitability.
With regards to risk management, the type of forex account you choose must offer you a degree of protection on your trading activity Naturally, SSL encryption, 2-FA and other account verification procedures are a major benefit to secure online trading activity. Additional financial security is possible with negative balance protection. The merits of this are as follows: if your trading position starts to lose money, you can lose up to the maximum of whatever is available in your account, no more than that.
This means you will not run into a negative balance and owe the forex trading company money. The user interface is another feature to consider. Since Forex trading can be a complex undertaking, it’s important for the trading platform and the account that you have chosen to be as user-friendly as possible. This means that you should have no problems buying and selling, monitoring pricing, comparing different currency pairs, and accessing real-time data from your forex trading account. Platforms with minimal downtime are preferable since trading is a 24/7 activity when all markets are taken into consideration.
What type of Forex Account is best for you?
There are many types of accounts at forex brokers. Each of them is geared towards a specific type of trader. Naturally, a casual trader with a minimal account balance will be better served with a standard account with low minimum transaction sizes starting at 0.01 lot. There are many benefits to a standard account, notably a low minimum deposit, often as low as $100, with favourable fixed spreads for casual traders.
Consider the cable (GBP/USD) with a fixed spread of 4 pips, or the EUR/USD with a fixed spread of 3 pips. Standard accounts typically don’t have all the perks of VIP-style accounts. Traders sacrifice personalised support and 24/5 live chat functionality for the ability to trade smaller volumes online. A standard account is the go-to option for novice traders, and low limit, low volume traders too.
Traders with a little more experience will want more flexibility and better Forex trading terms. In this vein, you may be inclined to go for a premium account with a larger minimum transaction size. This confers many benefits such as lower fixed spreads on popular pairs such as the GBP/USD, and the EUR/USD. The lower the spread, the more favourable the trading conditions are to the client.
Standard accounts typically have the highest spreads, while VIP accounts have the lowest spreads. In trading parlance, the spread is the difference between the ask price and the bid price. The spread represents the costs paid to the brokerage. Spreads are always denominated in pips; the higher the pip count, the higher the spread. As your trading prowess improves, it becomes viable to trade bigger amounts (bigger minimum deposits and trades) in exchange for more competitive pricing on popular currency pairs.
When you move from a standard account to a premium account, additional benefits are conferred such as improved customer support, live chat trading functionality, and lower trading costs. The jump from a premium account to a VIP account is notable. A VIP account offers more favourable fixed spreads on forex trading pairs. For example, it is possible to trade the GBP/USD pair with 3.3 pips on MT4 MetaTrader4, or just 3 pips on the web platform or app. There are also lower spreads on other tradable assets such as WTI crude oil and gold. Forex trading brokers will reward high-value traders with lower fees and commissions via the spread.
In most cases, you can expect all account types to offer comparable leverage. Leverage refers to the buying power of each unit of currency with a multiplier effect in place. For example, leverage of 200:1 gives you access to trading capital valued at 200 x the deposit amount in your account. Naturally, it is important to manage leverage carefully so as to avoid falling into a financial trap.
Some forex brokerages offer Super VIP accounts. These accounts are for high-value traders who are prepared to deposit large sums of money into their trading accounts. In some cases, a Super VIP account can require a minimum deposit of $50,000, or currency equivalent. With these high-value accounts, fixed spreads are significantly reduced on all currency pairs and financial assets.
Your budget, risk tolerance, and trading preferences will determine what type of account is best suited to you. Naturally, high-value traders want VIP-style service from their accounts. This means access to support around-the-clock, low spreads, premium-quality trading insights, and a wide range of tradable assets. Casual traders may not be as concerned about all the frills, provided they can make a low minimum deposit and trade forex online.