A forex trading account is an essential part of your development as a trader. It is basically where all of your trading activity takes place. It is an account that you would open with a forex broker.
Just like you have a bank account where you make your deposits and withdrawals, a forex account works in the same way. Besides being able to make a deposit and withdraw funds, it also allows you to trade.
Depending on the leverage that you use and the forex broker’s margin requirements, you need to have sufficient funds in your forex trading account at all times. When your capital falls below the margin requirements, there is a good chance that you will get margin called and your live positions being liquidated.
There are many different types of trading accounts and in this article, we will explain them in detail.
Forex demo trading account
A forex demo trading account is where you will open a virtual trading account. As the name suggests, there is no real money involved here. There are of course great benefits of using a forex demo trading account.
For starters, this is a great way for you to learn how to trade forex and other instruments such as CFD’s or precious metals. A forex demo trading account also helps you to test your various automated trading strategies.
While you might brush aside a forex demo trading account, the fact is that it is like a simulator that allows you to test new strategies risk-free.
Forex cent account
A cent account is a type of a forex account where you can deposit as little as $1. Yes, that is right, one U.S. dollar. You might ask if you can really make money with a cent account. The fact is that a cent account is leveraged, and you basically trade in cents.
Therefore, a deposit of $1 translates to 100 cents. With a 1:100 leverage, your account is now leveraged to 10,000. Of course, bear in mind that your balance is determined in cents.
A cent account will not make you rich trading forex, but it will allow you to take your trading skills to the next level. A forex cent account is a perfect balance between a demo trading account and a live trading account.
Here, with just $1 you are able to experience the real markets but not having to risk much.
Forex trading account
A forex trading account or a regular trading account is what you will normally see across many forex brokers such as JustForex for example.
A regular forex trading account allows you to make a deposit and start trading. Bear in mind that with a regular trading account, you are now risking real money. Therefore, you should be fairly proficient when it comes to trade with real money in your regular forex trading account.
To conclude, it is always recommended that you start off with a demo trading account as this is the best practice you can get. Once you hone your trading skills, it is ideal to move to a forex cent account or a regular trading account.
Depending on your risk tolerance and your practice and familiarity of the markets, you can now be able to trade.