What Is a Forex Account?
Forex accounts give investors and traders the ability to trade all major currency pairs and some emerging market pairs.
How a Forex Account Works
A forex account is a type of account that a forex trader opens with a retail forex broker. Forex accounts come in many forms, but the first that is opened is often the forex demo account.
From Forex Demo Account to Forex Account
After the trader has tried out demo accounts with a few different dealers, a funded account would be the next step. Mini accounts, full accounts, and managed accounts are the most common types of funded accounts. Mini accounts are similar to full accounts except that currency is traded in lots of 10,000 rather than 100,000. This allows for lower mandatory initial deposits and greater customization of risk management.
As the number of forex brokers has grown, the lower the cost of managing accounts has become. Most will have no initial set-up fee and charge the user per trade, which will often be determined by the size of the trade. For example, someone who wishes to trade a notional amount of 1,000,000 units will pay a higher fee than a beginner who is trading in units of 10,000.
Forex Accounts—Which One to Open
It is important for currency traders to consider what they want to get out of their accounts before deciding on the type to open. Demo accounts and mini accounts are great for the retail forex trader to learn a profitable system and get used to the broker's execution methods. For currency speculators who don't want to trade themselves, a managed account may be a better option.
Depending on the type of forex account, some may give the trader capabilities to trade other products such as forex options and forward contracts.