What are Forex accounts? When you start your journey in the world of Forex, there are some things that you should know in addition to the strategies and different methods of analysis. Among these things is the Forex account, because there are many accounts in Forex that you may have seen at the broker you registered with, but which account do you choose and which account is suitable for you?
Knowing the right Forex account for you is very important because choosing a Forex account is part of the strategy you will trade with. The Forex account can change the spread, leverage, and also the speed of executing trades.
A Complete Guide to Forex Accounts
1- How many Forex accounts are there in the market?
There are many Forex accounts that you may notice the broker offers to traders. Each broker wants to compete with the other in order to attract more traders to make a deposit with him and thus benefit from the spread and other services that he provides.
As a trader, you will need one or two Forex accounts at most, depending on the strategy you use. These are the accounts that you may find the broker offering to traders.
Please note that Forex account names may differ from one broker to another, as the broker may name his accounts with names that attract the attention of traders, so they choose this Forex account, but the specifications are the same, but the names are what differ.
1 – Standard Accounts
The standard account is the most common among traders, and most traders use this account because it does not have any complicated conditions for opening it.
The minimum deposit you will find is usually from $1 to $10, but most brokers offer this Forex account without difficult conditions for retail traders. As for the spread, it is variable and starts from 0.9 pips on the EUR/USD and you may find some brokers offering a fixed spread in standard accounts.
Mini deposit: starting from $1 To $10
Spread: Floating Starting from 0.9 pip
Commission: No commission
2 – Mini and Micro Accounts
The micro Forex account is a little different from the standard account in the way it calculates the lot because the lot here is a little different. For example, in the standard account, the lot is equal to $100,000, but in the micro account, the lot is equal to $1,000. In other words, when you open a trade with one lot in the micro account, this trade is equal to 0.01 lot in the standard account.
And almost the same thing in the mini account, but the mini is a little bigger than the micro, as one lot equals $10,000 in the mini account. You may ask yourself why there are Forex accounts that are difficult to understand like that.
In fact, these two accounts are very important for retail traders. For example, if you want to deposit only $10 in the standard account, you will not be able to open 0.01 if the leverage is small, and thus you will not be able to trade. However, a micro or mini account is suitable for this type of trader because in this way he can open the lot he wants. Remember what we said earlier that brokers compete with each other to satisfy all traders and have them deposit money with them, and thus they profit from the spread and the services they provide to them.
Mini deposit: starting from $1 To $10 (Same as Standard)
Spread: Floating Starting from 0.9 pip
But you may find some brokers adding an additional spread, and you will find it a little more than the standard account. This is actually normal because it provides you with an additional service so that you can trade through it, and in return for this service, it adds an additional spread.
Commission: No commission
choose the right account
3 – Fixed Spread account
This type of Forex account is offered by the broker to traders who want to trade during news times because the spread in this account is fixed and not variable.
You may notice a high spread in these forex accounts. As we said before, the spread in the standard account starts from 0.9 in the euro dollar, but you will find it in this account as 2 or perhaps 3 pips because the broker gives you this account and does not raise the spread value during news or at midnight, and thus he will lose money that he could have obtained.
And as compensation for this loss, or in other words as an additional cost for the service that the broker provides you, which is the fixed spread, he increases the spread from the usual by double or Triple, and in fact this is not a bad thing because you will trade during the news and you will not be concerned with the crazy increase in the spread that may reach 12 points on EUR/USD during the news, and you will be able to manage your trade as it should be.
Mini deposit: starting from $500 To $300
The deposit size in this Forex account is higher than any other account because the brokers know very well who will choose this type of Forex account, which is the traders who trade during news time, so they exploit the traders’ need for this type of account and increase the minimum deposit.
Spread: Fixed start from 2 To 5
In my opinion, if you see a broker offering a fixed spread of more than 3 pips, I do not advise you to join with this broker because this spread is exaggerated. The normal and reasonable fixed spread is only 3.
Commission: No commission
4 – Zero spread account
This type of account is somewhat similar to the Fixed Spread account, but without the spread, and the broker adds a commission instead of the spread.
The two Forex accounts are almost similar in cost because the fixed spread in this case is replaced by a fixed commission and you will most likely find the cost to be the same or very close, but there is a slight difference. You will notice that there is only one price line on the platform because the Ask and Bid prices Are the same, in this case, there is no spread and when you open a trade of any type, buy or sell, it will be placed in this line, but when you open the trade, the commission will be added to the trade.
Mini deposit: starting from $500 To $300
The same applies to this account as well, due to the additional service that the broker provides you, he must increase the minimum deposit.
Spread: Zero Spread
Commission: Fixed Starting from $2
5 – ECN account
ECN account
Very often the term ECN account is used, and this system was recently used in Forex this modern system is straightforward and fast technologies, and It enables you to execute trades directly to liquidity providers such as major financial institutions and international banks without the need for the broker to execute trades and the trade become With the control of the bank, not the broker.
Mini deposit: starting from $500
Spread: Floating Starting from 0.7 pip
Commission: Starting from $1
ECN (Electronic Communication Network) This type of Forex account allows you to trade without a broker (the brokerage company), meaning that the broker does not execute your sell and buy orders but rather the execution is through large banks such as (HSBC – QNB … etc). Thus, the broker cannot manipulate prices or impose additional spread on your trade, but the implementation and protection of your account are the responsibility of the bank, and thus the best bid and ask rates are displayed on the platform.
What is the role of the broker when you get an ECN account??
The broker provides you with many services such as the platform, bonus, technical support … etc. But since you are a client with the broker, it takes a commission on ECN smaller than the commission on the regular Forex accounts, and the greater the volume of your trading, the higher the broker commission, but in terms of trading the broker does not interfere In your account, but if a problem occurs in your account, you can ask the broker to help you, of course, because you are his client.
What is the ECN Account Feature?
- There is no tampering on the platform as the broker sends orders directly to the bank
- (No Dealing Desk) the technology ensures that there is no re-pricing on the platform
- The best available bid and ask price on the market + very small spreads
Why isn’t everyone using an ECN account?
- as an ECN account has advantages, it also has disadvantages, or we can call it protection for the trader, the minimum deposit is usually between $100 and above, so the higher the minimum deposit, the more targeted customers will be a certain group of people who can open such accounts.
- Leverage is not very High
The account is non-Islamic (SWAP ON), This means that if you want to leave the trade open for the next day, the broker will ask you for additional fees, this fee may be positive or negative
Islamic Account
Islamic Account
The Islamic Forex accounts do not require any Swap on the trade because these swap, which are calculated for the overnight trades, and its usurious and prohibited by Islamic law. If your account is Islamic, you can let the trade to the next day or any period you want, and the interest will not be calculated on your trade.
How to activate the Islamic account on my account?
When you decide to open an account with the broker, you will find a box for an Islamic account or Swap, You must activate this option so that the broker does not impose overnight fees on your trades.
But what does the broker benefit?
There is another profit that the broker takes, which is the spread, Transaction commission, And commissions on withdrawals, deposits, and other services provided by the broker
What will happen if my account is not Islamic?
An overnight swap will be added to this transaction. This swap may also be positive, meaning that you can make money from the overnight trades if the currency you bought has a higher interest rate than the currency you sold. In this case, you will receive a profit due to the overnight transaction.
Should my account be Islamic?
The answer to this question depends on you and your trading method, and it is you who determines whether you want It or not, but if you want my personal opinion, I prefer To active this option because I do Risk management for my account and if my account is not Islamic the swap may be negative and therefore There will be a gap in the management of the capital and I will be distracted.
Adding some money to your account is good, but you must look to the other side and it is that you can lose a lot of money if you are a long-term trader and your account may be affected by the swap that will be added to you and I do not think you will be satisfied in this case.
Conclusion
Choosing a Forex account is very important for the trader because Forex accounts are an integral part of the strategy you are working on. There are many different accounts in terms of spread, execution speed, and minimum deposit. If you want to deposit a small amount, you can choose a mini or micro account, but in this case, the spread will increase in the trades you will enter.
There are also accounts for professional traders that require larger deposits than regular accounts and have much lower spreads. All of these are features that professional traders can benefit from in their trading.
