At this point of your forex education, you must already be familiar with how foreign exchange trading works ? it is the buying and selling of different currencies. This significantly liquid marketplace attracts many new investors each day, and these individual investors can readily compete with large banks and hedge funds. The success of any forex investor relies on several different factors, one of which is setting up the appropriate forex account. There are basically three types of trading accounts in the forex market: standard, mini, and managed. Each of these trading accounts has its own advantages and disadvantages. Choosing which trading account to open is typically determined by the investor’s tolerance for risk, the size of initial investment, and the amount of time an investor has for participating in forex trading on a day to day basis.
The most common type of forex trading account is referred to as the standard trading account. The name of this kind of trading account is taken from the fact that investors who open this type of account have access to standard lots of currency. You might have learned from your forex education that a standard lot is worth $100,000, and this is pretty much observed by everyone who participates in forex trading. However, having access to a standard lot does not mean giving out $100,000 of capital before you can start trading. It simply means you must have $1,000 in your margin account so you can start trading one standard lot.
Mini trading accounts are simply trading accounts that allow traders to make transactions with the use of mini lots. Most mini lots are equivalent to one-tenth of a standard trading account, which is around $10,000 dollars. Most brokers that offer standard trading accounts typically offer mini trading accounts as well. This is one way of attracting new investors who are still hesitant to trade full lots due to the amount of investment needed.
Another type of forex trading account is called managed trading account. In managed trading accounts, the capital is owned by the investor but decisions whether to buy or sell are made by account managers. These account managers handle the trading account for the forex investors, very much like how stock brokers handle managed stock accounts.
It helps to give time to your forex education so you can learn more about these accounts. Knowing the different advantages and disadvantages of these three different accounts will help you determine which kind of forex trading account to setup so your needs and objectives can be best met.