Forex Trading Accounts

To trade online, you need to open a forex trading account. When you sign up, you will likely have to choose among several account types. The best Forex trading accounts are those that suit your personal needs perfectly. On this page, we look at the Forex trading account options you have. We also discuss ways in which these account options will impact your trading performance. You will learn:

  • Which is the best Forex trading account?
  • Account types. What is a standard account, a funded account, a mini/micro account, a managed account, etc?
  • Geographic account type considerations.

Below are the best forex trading accounts in your location:

The Top 5 Forex Trading Accounts are a leading forex broker. Offering the largest range of currency pairs (80+) and some of the tightest spreads in the industry.
NinjaTrader offer Traders Futures and Forex trading. Use Auto-trade algorithmic strategies and configure your own trading platform, and trade at the lowest costs.
Trade with leverage on the FX market.
The leading US trading Exchange. Nadex offer genuine exchange trading to US clients on Binary Options. Fully regulated by the CFTC.
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Show All Brokers ⇩

Opening a Forex Trading Account

What do you need to consider when opening a new Forex trading account?

  • The brokerage firm. Is it reputable or is it a known scammer?
  • The services the brokerage firm offers.
  • Costs and incentives involved.
  • The account type that best suits your needs.

Once you have gotten these issues sorted, there is 3 step process for opening an account:

  1. Fill out the application forms and provide the information your broker requires.
  2. Fund your account.
  3. Start looking for investment opportunities.

When you select a brokerage firm, you take all these factors into account. You need to know whether your would-be broker is a trustworthy destination for traders. Though fewer these days, rogue operations still exist. Creating a real money account with such a broker is flushing money down the toilet.

You also need to know what incentives your broker offers. Match up these incentives with the costs. The broker has to support the account type you prefer and it has to give you access to a proper suite of services. You may even have a preferred account funding method. The broker may or may not accept/support that method.

Services-wise, you are looking for:

  • Proper trading platforms, with solid technical analysis tools.
  • Access to education and research.
  • Trading Foreign Markets.
  • Special features you may want.
  • Convenience. Some brokerage firms offer face-to-face guidance. Others do not. It always makes sense from the perspective of trust, to prefer an operator with physical offices close by.

As far as incentives go, some brokers offer commission-free trading. Others may even reward you for certain achievements as a trader. You may even want to keep your savings with the broker if it rewards you for it.

Make sure you read and understand the full pricing schedule/policy of your broker.

Determining the right trading account type to meet your needs depends on what kind of trader you are, and what your objectives are.

When you fill out your application forms, be aware that you will have to provide information on your employment status, investable assets, and net worth. Some find such probing on the part of the broker quite intrusive.

You also have to provide a copy of your ID/driver’s license. If you want to trade options or gain access to margin, you may have to provide additional information.

Brokers accept several account-funding methods.

  • Various e-wallets. (Neteller, Paypal, Skrill etc)
  • Bank transfer.
  • Electronic funds transfer.
  • Checks.

Some may accept asset transfers and even paper stock certificates.

Which is the Best Forex Trading Account?

As mentioned, the best account type for you is the one that best suits your needs and personal profile. The factors you should consider in this regard fall into two main categories.

Your investment objectives.
The type of trader you are.

Choosing a Forex Trading Account Based on Your Investment Objectives

– Most “casual” traders invest with a relatively near-term goal. The “make some money” mantra is the main driver behind such efforts. If this mantra describes your investment objectives, you likely need a traditional brokerage account. Such accounts do not offer any tax advantages. On the other hand, they do not tie up your investments long-term either.
You may also be able to trade on margin with such an account. Trading on margin involves borrowing money from the broker. The assets in your account will serve as collateral in this case. Trading on margin carries some obvious risks.

– If your goal is to secure your nest-egg for your retirement, an IRA (Individual Retirement Account) is your option. All IRA options, such as Traditional IRA, Roth IRA, and Rollover IRA offer you tax benefits. On the downside, you will not be able to touch this money before you are old.

Choosing a Forex Trading Account Based on What Type of Investor You Are

  • You are an absolute beginner. And as such, not much of an investor. What you need at this stage is education. Possibly some good trading signals as well. In a word, you need an account, through which the broker can hold your hand. It could be that your ambitions are not high. Still, you need to know why you are doing what you are doing. Customer service and user interface are important factors in your account selection.
  • You are a “value” investor. Such investors buy and hold assets, to sell them when they appreciate. Such investors are not active traders. If you are a value investor, you value fundamental analysis. You have little use for charting and fancy technical indicators, however.
  • Passive Investing. Those who invest in index funds passively do not require much from their broker. Unlike beginners, such traders don’t need their hands held either. They just need access to index funds, and good tradable asset selection within this category.
  • High Frequency Trader. Active traders do not hold their positions long-term. They buy and sell with high frequency. Thus, they need all the bells and whistles their broker can offer them. They want good trading platforms with superb charting. Outstanding reporting and a highly functional interface are also musts. Technical analysis is the bread and butter of this trader category. Trading costs are also very important for active traders.

Forex Trading Account Types

There are four basic account type categories: Standard, Funded, Mini and Managed. We will look at each in turn.

Within these categories, there are a few additional variants, such as the Micro accounts. There are a handful of special account types as well, such as Islamic accounts, Demo accounts, and VIP accounts. Every one of these account options carries some advantages and some disadvantages.

Standard Trading Accounts

The name of this account option stems from the standard lots to which it gives traders access. A standard currency lot is worth $100,000. Such a lot size seemingly places this account type out of the reach of average traders.

You do not have to have $100,000 in your account to trade, however. The existence of margin and leverage means that you only have to have $1,000 to trade a standard lot.

Leverage varies based on many things. In the EU, forex leverage is capped at 1:30. In other places, brokers may offer leverage up to 1:500 even on standard accounts.

Brokers offer full services for the holders of standard accounts. Such accounts require upfront capital, so these are all depositing traders. The profit potential of this account type is significant as well.

On the downside, the same goes for loss potential. For this reason, you should only trade through a Standard account if you are an experienced trader.

Funded Trading Accounts

Some brokers/other financial organizations fund certain traders. They provide them with starting capital, in exchange for a share of their future profits.

How does such a setup work?

Would-be funded account owners need to pass an evaluation program. If the broker’s analysts consider them to be good candidates, they grant them a funded account.

Funding can run into millions of dollars. Profit splits are in the 50% range. Funded accounts carry monthly profit targets. Traders who fulfill these targets can gain additional funding.

The broker pays out the profits periodically.

What do you need to do to secure such a funded account?

  1. Your first step is to sign up for the evaluation program.
  2. Trade through the evaluation account and reach the targets.
  3. Earn a proper funded account and start making money for you and the account provider.

Mini and Micro Trading Accounts

A Standard Account features $100,000 lots. For traders who cannot afford to trade in that league, despite margin and leverage, Mini accounts offer an alternative. A Mini account supports mini lots. These lots are worth $10,000 each. Mini accounts usually accompany Standard accounts and they target new traders.

Micro accounts take this approach a step further. They support micro-lots of $1,000. Such accounts are even more affordable than the Mini ones. Like the Minis, Micro accounts target beginners as well.

The main advantage of Mini and Micro accounts resides in risk-reduction. For a mere $250-$500, you can open such a trading account. Trading in lower increments stretches your funds longer as well. This is one of the reasons why professional traders like to use such accounts. They can test their strategies in a low-risk, real-money environment.

In addition to the inherent risk-minimization benefits, Mini and Micro accounts let you spread your funds thinner. Thus, you can better micro-risk-manage them.

The obvious downside is that risk/loss minimization reduces profit potential as well. Such accounts are, therefore, hardly suited to cover the profit needs of professional/advanced traders.

Managed Trading Accounts

Forex trading account management works like this, A managed account is one that holds your funds but excludes you from decision-making. You make your deposit, and someone else – usually a broker-side expert – does the trading for you. You may be able to set objectives, however.

Why would you want to give up control through such a trading account?

– You are not an expert and you feel that the manager will do a better job than you ever could. Thus you let the manager handle your individual trading account.
– You feel that pooling your money with the funds of other investors offers you a degree of protection. Such managed accounts work like mutual funds. Managers handle the trading and they distribute the profits.

Managers rank these pooled accounts according to risk tolerance. Those looking for higher profits opt for more risky accounts. Those with a lower risk tolerance play it safer, earning less.

The main advantage of a managed account is that it allows you to cash in on the skills of a Forex professional. Furthermore, you get to do it hands-off.

The disadvantage is that this Forex expert will cut a commission from your profits. Managed accounts require larger deposits than regular ones. Individual accounts may require as much as $10,000. Pooled accounts are slightly cheaper at around $2,000.

Islamic Trading Accounts

Islam holds trading to be haram (not permitted). There are ways to turn it into halal (permitted), however.

All trading activity has to adhere to the principles of Islamic finance.

  • There must not be any interest (riba) involved.
  • Exchanges involved in trading have to be immediate.
  • No gambling is allowed.
  • Risks, as well as benefits, have to be distributed.

Islamic accounts are swap-free accounts, through which transactions and the payments of costs associated with them, happen instantly. In the context of Islamic trading accounts, the margin, commissions and administrative fees are not riba.

VIP Accounts

Brokers reserve their VIP accounts to their most privileged clients. A VIP account holder enjoys special benefits, such as superior trading conditions. Forex brokerages often invite VIP traders to special events, treating them to special rewards.

What do you have to do to gain access to such an account?

You normally need to deposit an unusually large amount of money (often upward of $100,000). You will also need to trade frequently and perhaps meet certain trade volume requirements.

Demo Accounts

A Demo account is the “play money” simulation of a real account. It allows traders to test the platform and trading conditions. Some may also use such accounts to test-run certain strategies.

When you sign up for a Demo account , the broker credits your account with a set amount of virtual funds. Some Demo accounts offer the same functionality as a Standard/Mini/Micro account. Others limit their users’ access to certain features.

Geographic Considerations

Sometimes, your geographic location should play a role in your account type selection. Some jurisdictions may limit certain trade types. In the US, there is no CFD trading. The practice is against US securities laws.

Leverage varies greatly between EU regulated countries, the UK for example, and other parts of the world. In the EU forex margin is limited to 1:30 by ESMA, the European regulator.

In other parts of world, India and South Africa for example, leverage can be offered up to 1:1000 (Though 1:400 or 1:500 is more typical)

The taxes you have to pay on your profits also vary from one jurisdiction to another. Read our taxes page for more on that.