While a Forex trader is practising on a demo account, the question of which account type is better does not bother him much. But when switching to real money, it is very important to make the right choice..
A Forex broker offers each trading deposit option to the client as a separate project, which has specific technical, financial, bonus characteristics. A trader or investor often overlooks specific details that can reduce trading losses or simply make trading more comfortable.
Demo (training) account
It is a deposit to which the broker credits virtual funds so that the trader can simulate regular trading transactions. It works in a standard platform with the same trading conditions (assets, spreads/swaps/commissions) and quotes as a trading account with real money. Based on the results of trading, full statistics are kept, automatic trading is allowed, indicators, signals, news are present in the usual volume. The main thing is that the broker uses the same stream of quotes for the demo account, without gaps and adjustments. As a rule, demo versions are supported for all types of accounts that are available on a specific trading platform, some brokers may limit the validity period.
Everyone starts with a demo account; they learn to trade, check indicators, work out strategies and money management on it. Profits and losses are virtual, but the experience is real. In the future, such accounts are used in parallel with regular deposits.
Live trading account
To conduct transactions, the deposit must be replenished with cash. Trading conditions are determined by the type of account offered by the broker. Deals are executed at real quotes, the speed of processing requests is worse than on a demo account.
Switching to a real account (regardless of the amount) is possible only after a training course and a stable profit on a demo account.
Sometimes a broker for advertising purposes offers to open an account with a certain virtual amount, usually a small one, for example, as a bonus for replenishment of a deposit or to participate in a contest. For this amount, deals are opened, you can withdraw the profit earned with it, and sometimes you can withdraw the bonus itself if certain conditions are met, for example, on the trade turnover. An excellent chance for beginners to gain trading experience and a small real profit.
Such accounts allow the investor to profit from trading with the total capital in proportion to the amount of his investments. Trade statistics are public, you can connect or exit the project at any time. A fairly effective passive income option for those who do not trade on their own or do not have large capital to implement their trading experience.
Without leverage, the size of a standard lot on Forex is $100,000 (or the equivalent in the selected currency). The balance of the deposit is reflected in dollars, the minimum lot is 0.01, the price movement by 1 point (in 5-digit quotes) costs $0.1 or 10 cents.
This is a full-fledged type of deposit for real trading, the margin amount depends on the leverage provided by the broker. It is used by experienced traders or confident beginners. You can open an account with $10-100, but in order to get tangible profits at normal risk, it is recommended to invest at least $200-500. Medium-term transactions of 1 day or more are assumed or non-aggressive intraday trading, and speculation requires either a more serious deposit or a trading account of the next category.
Higher leverage allows the trader to use a trading account whose balance is displayed in cents, for example $50 would be displayed as 5000. The minimum lot is the same – 0.1, but 1 point of price movement will cost $0.01 – 1 cent. Such an account allows you to start working with almost one dollar: the process and trading conditions are the same as on a standard account, but the risk of actual losses is 10 times less. Profit, accordingly, also grows 10 times slower. The optimal choice for a sensible beginner – losses are not critical, and successful trading brings an incentive prize. Moreover, you can deposit a large amount on such an account, but work on the same scale.
Today, most popular brokers offer deposits that do not charge a swap – a commission for moving an order to the next trading day. They are called “Islamic” because they were designed for clients who strictly adhere to Islam’s prohibitions on earning money from usury. The broker has the right to require confirmation of the client’s appropriate religious affiliation, but usually these rules are not very strict.
Swap-free accounts are preferred by experienced traders, at least in the medium term, who keep deals open for a week or longer. If you are ready to trade on standard real and the broker has Islamic accounts – try it, but find out how to change the type of deposit if you change your mind.
Standart (classic) account
Market execution assumes that the order is guaranteed to open at the “best” (from the market point of view, of course) price that is present in the stream of quotes at the moment the broker opens the order. During the time while the broker processes the application, the price changes and the result of the transaction may be worse than your expectations.
Constant spreads/commissions are offered, but delays in order execution in an unstable market are allowed. It is not always beneficial, but it simplifies technical analysis and money management. There are usually no restrictions on the types of orders, automatic trading and other parameters.
This type of deposit is suitable for non-aggressive technical trading; it is not recommended for scalpers and other risk lovers.
The method of processing orders is assumed to be instant execution (exact execution): the order is triggered when the market price equals the price in the order, taking into account the slippage range (set either by a trader or a broker). If the asset is too volatile, then the order will not be processed at all, but if executed, the price will be the most accurate and profitable for the trader. Closing is also at the best price.
The processing speed is high even in the speculative market, the spreads and commissions are dynamic – lower than those fixed on a standard account, but they can be too high, it all depends on the liquidity of the asset. There are restrictions on working with pending orders and setting Stop-Loss/Take-Profit (only after opening an order).
But, as they say, “spread decides everything” – today these are the most popular and favorable conditions for all types of assets and trading methods, despite additional risks.
The bottom line
Should you open deposits with different brokers or keep all your capital on one platform? From the point of view of risk, it is quite logical to keep a small and large deposit with brokers with the most convenient trading conditions, if you are able to cope with constant control over all accounts. But it is clearly not profitable to dissipate capital on several fundamentally identical projects.
The broker has the right to establish special rules, for example, to restrict access to certain types of assets or to open separate deposits for cryptocurrencies and binary options. Sometimes VIP accounts with more comfortable spreads or bonuses are offered for large clients, but there may also be hidden dangerous “features”. In any case, the technical characteristics must comply with the general classification, so study all the conditions carefully.