Before start trading on Forex, a novice trader needs to decide which type of forex tading account to choose. There is a sufficient number of account types for trading, all of them have their characteristics and features.
Different brokers offer various account types. The following types of Forex accounts can be distinguished: demo, cent, classic or standard, swap-free, PAMM, ECN. Let’s consider each type in more detail, as well as the differences between them. They differ in trading terms.
Types of Forex Accounts
Demo account is the first type of account with which every novice trader should begin the first steps on Forex. Trading on demo account is carried out with virtual money, which means that traders do not use their capital. At the same time, the quotes and charts are real.
While trading in a demo mode, the trader has the opportunity to gain the necessary skills for further work in the foreign exchange market.
Having obtained the trading skills, you can switch to real accounts. Do not rush to invest large sums, start with cent accounts. Cent account is created for trading with the small initial capital without risking. The trading balance is displayed in cents. This type of accounts will be an ideal option for traders who have already gained some experience in trading on a demo account but are still not prepared for trading with significant capital.
Trading with cents is also regarded as educational. However, the psychology of the trader changes, as profit and loss are measured in real money.
Classic or Standard
Standard or Classic account is the most common type of accounts. It is suitable for trading on timeframes from H1 to D1 and non-aggressive trading methods throughout the day. It is not recommended scalpers to use these accounts. Take profit and Stop loss levels can be placed both during and after the opening of the transaction.
Scalpers and day traders, who open frequent but short trades choose the ECN accounts. The spread on it is floating, but lower compared to Standard accounts. An ECN account is a trading platform where all traders, banks, brokers trade without intermediaries.
ECN accounts work according to the following principle: the seller sets the price at which he would like to sell the currency. Similarly, the buyer sets his price at which he is ready to buy. All applications to buy/sell fall into the so-called order book, where, if the interests of both parties coincide, a transaction will be executed.
Prices depend on the offers of market participants. Order execution for ECN accounts is better.
Cent, standard and ECN accounts can be swap-free. Swap-free accounts are accounts that do not have a swap, i.e. commission for the transfer of open position through the night.
Such an account will be appropriate for traders who use long-term strategies, keeping trades open for several weeks or months. If deals are short-term, then there is no point in opening swap-free accounts. Typically, the broker charges an additional fee for opening transactions, compensating for the lack of a swap.