When choosing a forex broker, the account type you select is very important. Let us look at the different forex account types:
Standard Account – The standard forex account is denominated in US Dollars. One standard lot is 100,000 units of currency. For example a long, 1 lot of GBP/USD would be buying 100,000 GBP and selling dollars. The dollar amount sold would depend on the GBP/USD exchange rate at the time of opening the position. Standard Accounts are offered by nearly all forex brokers. As a general rule of thumb, it is not recommended that you trade a standard account unless you have an account balance of at least $100,000. Many brokers will offer standard accounts to clients with a 5 figure account balance. For most trading styles, this would involve using too much leverage and could potentially result in catastrophic losses. A standard account is usually only suitable for experienced traders.
Forex Mini Account – A Forex mini Account the same as the standard account, except it allows the trader to trade mini lots. Mini lots are 1 tenth of the size of a standard lot. If we refer to the same example above of the long GBP/USD position, but instead use 1 minilot instead of 1 standard lot, we would be buying $10,000 GBP and selling dollars. Minilots are essential for traders will a smaller account balance. Most brokers now offer traders the opportunity to open a mini account. For most forex trading strategies, a mini account is suitable for account balances over $10,000. Do not be fooled by brokers allowing you to open a mini account very small amounts. Nearly all these accounts end disastrously in a margin call. A mini account is often suitable for new and experienced traders alike.
Forex Micro Account – A Forex micro account is generally used be new traders who wish to experience a live trading environment without risking a large amount of money. Micro accounts allow the trader to trade microlots. 1 microlot is a tenth of a minilot and a one hundredth of a standard lot. If we use the same example again of the long GBP/USD position, but instead use 1 microlot, the position would mean we were buying 1,000 GBP and selling dollars. Micro account are generally best suited to account balances between $1,000 and $10,000. Although different trading systems can make these numbers substancially different.
Foreign Currency Forex Accounts – In recent years as retail forex trading has grown hugely in popularity, the demand for forex accounts in currencies other than the US dollar have grown. An increasing number of forex brokers now offer forex accounts in many of the major currencies such as GBP, EURO, YEN. Below includes a small list of regulated brokers that offer accounts in currencies other the the US Dollar: