What are Forex Basics?


Foreign exchange (Forex) trading consists of buying and selling global currencies, and the market is among the most liquid in the world.


Standard trading accounts

The standard trading account is the most popular. This account gives the user access to a lot of the standard $ 100,000 currency.


This does not mean that you have to put in $ 100,000 equity in order to trade. The rules of margin and leverage (usually 100: 1 in Forex) mean that only $ 1,000 should be in the margin account to trade one standard quantity.


Positives

Service: Since the Standard Account requires sufficient initial capital to trade full contracts, most brokers offer more services and better perks to individual investors who have this type of account.


Potential Win: With each pip equal to $ 10, if a position moves with you by 100 pips in one day, the gain will be $ 1,000. This type of profit is not possible with any other account type unless more than one standard lot is traded.


Negatives

Capital requirements: Most brokers require standard accounts to have a minimum balance of at least $ 2,000 and sometimes $ 5,000 to $ 10,000.


Simple trading accounts

A mini trading account is just a trading account that allows traders to make transactions using mini lots. On most brokerage accounts, a small lot equals $ 10,000, or one-tenth of the standard account. Most brokers that offer standard accounts will also offer mini accounts as a way to bring in new clients who are reluctant to trade full contracts because of the investment required.


Positives

Low Risk: By trading in increments of $ 10,000, inexperienced traders can trade without blowing through an account, and experienced traders can test new strategies without risking significant capital.


Low capital requirements: Most mini accounts can be opened for between $ 250 and $ 500 and come with leverage of up to 400: 1.


Flexibility: The key to success in trading is having and sticking to a risk management plan. With mini lots, this is a lot easier because if a standard lot is very risky, you can buy five or six smaller lots and reduce the risk.


Negatives

Low bonus

With low risk comes low reward. Small accounts trading $ 10,000 can only generate $ 1 per pip of movement for $ 10 on a standard account. This account type is recommended for beginning forex traders or those looking to participate in new strategies.


Managed trading account

Managed trading accounts are forex accounts where you own capital but buy and sell decisions are not. Account managers deal with the account just as stockbrokers do with a managed stock account, where you set goals (profit targets, risk management) and the managers work to achieve them.


There are two types of managed accounts:

Pooled Funds: Your money is put into a mutual fund with the money of other investors, and the profits are shared. These accounts are classified according to their tolerance for risk.

Individual accounts: The broker deals with each account separately, and makes decisions for each investor rather than the joint pool.


Positives

Professional Tips: Dealing with a professional account Forex trading broker is an advantage that cannot be overemphasized. Also, if you want to diversify your portfolio without spending all day observing the market, this is a great option.


Flexibility: 

If you see that the market is moving, you will not have the flexibility to place a position. Instead, you should rely on the account manager to make the right decision. This type of account is recommended for high equity investors who do not have the time or interest to follow the market.

walid
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