The consistent trader knows that trading with the right type of trading account is equally important as having the correct type of forex broker.
Must Read: 10 Key Factors while choosing an Online Forex Broker
You will need a professional forex account because all retail forex trading transactions go through and are managed by a forex brokerage firm.
With the right type of currency account, you will trade with ease while focusing on your financial goals.
Different types of accounts in forex trading are available-each with its pros and cons-as outlined in this article.
What is a Trading Account?
This is a foreign exchange trading account held at a forex broker used to hold and transact in fx currencies.
Getting the forex account is a matter of simple steps either at a broker’s office or online at the broker’s website.
After opening the foreign exchange account, you fund it with your local currencies then use it to buy and sell foreign currency pairs.
While several types of forex trading accounts exist, all traders are advised to start at a forex trading demo account before operating the real forex trading account.
Must Read: Guide – How to Open a Forex Trading Account
The Forex Trading Demo Account
What is fx demo account? In case you are wondering, it is a trading account that it’s free and operates with virtual money while being connected to the live forex market.
With the trading demo account, traders can practice their trading knowledge and sharpen trading skills.
Experience the losses and gains virtually in real-time as you put your knowledge and skills in forex trading.
It’s only after some practice that you can then have a go at one of the different accounts in forex exchange trading.
Different Types of Trading Accounts
The demo account affords you the pleasure of trading without real money.
If you are looking for a forex account with pros and without cons, then you will always find yourself at home with the free demo account.
The cent, mini trading, classic trading, and Managed trading forex accounts are the different types of accounts that you will come across at the forex brokers.
Here are the different types of trading accounts and their pros and cons that will enable you to make an informed choice as you migrate from the demo account to live forex trading.
The Cent Trading Account 
With as low as $1 requirement to open the cent account, it is favored by many, particularly those who prefer taking forex as a hobby.
Likewise, if you like to risk low while building your confidence slowly, this type of forex account is suitable.
You will encounter losses, but minimal while enjoying the wins.
Pros
- Minimal capital
- No commissions
- Trading in small lot size
- Access to unlimited leverage
Cons
- Lacks demo account
- It is limited to less than five account currencies
- No bonus
The Mini Account
Among the forex account types, the mini trading account is highly popular.
It is very suitable for beginners who wish to build up their forex trading experience due to its low budgetary requirements.
You need a small investment starting from $1 to start trading with the mini forex account.
However, the capital required may be higher in some countries.
Pros
- It is low risk because only a minimal capital of $1 is required to start trading. Also, you trade with several small lots as opposed to trading with a lump sum amount.
- Access to unlimited leverage enables traders to make huge transactions while risking a minimal amount of their capital.
- Bonuses are available
- No commissions charged on trades
Cons
- It has lower profit potential due to its pips; mini trade yields $1 per pip as opposed to the classic trading account that yields $10 per pip.
- Limits on trade volumes and positions
- A limit on pending orders
The Classic Account
This variety of accounts, also known as a standard trading account is suitable for the experienced and consistent forex trader.
The main reason being its trading feature is set to maximize profits to the trader as a result of low spreads.
It is more profitable than any other forex account for trading; hence forex winners prefer it.
Pros
- It has the potential for higher gain because each pip is worth $10.
- Availability of unlimited leverage
- No commissions on trades
- Low spreads starting at 0.1
- No hedging margin
- Unlimited trading orders
Cons
- It has a high potential for loss as every pip lost is equivalent to a $10 loss. Therefore it is suitable for investors that can afford to risk large amounts of money.
- No bonus
- High capital required
- It needs a large trading volume.
Managed Account
As the name of the account implies, a trader contributes the capital. Still, the management of the investment is left to forex professional.
The trader specifies his/her investment goals to the investment managers during the managed trading account’s opening process.
The managers make plans to achieve the investment goals for the busy investor or those that prefer forex trading experts.
Managed trading account is further sub-divided into two categories depending on management and investment principles:
1. Pooled funds: under this type of forex investment, capitals of several investors are combined into a mutual fund, and all the profits and losses are shared amongst the investors.
On a risk tolerance level, an investor can either opt for a steady income with a low risk/reward ratio or higher shorter gains with a high risk/reward ratio option.
2. Individual accounts: these are trading accounts in forex managed on an individual basis instead of being in a mutual fund.
What are the pros of a managed trading account?
Professionalism: the forex experts and investment managers are better equipped to read forex signals and undertake technical analysis of the foreign exchange currency trade.
Freedom: you will enjoy freedom as your money is being invested for you by financial experts. Hence, you will be free of forex trading hassles and emotional stresses while comfortably engaging in your other activities.
Are their cons in managed trading accounts?
The managed trading is not devoid of some cons as outlined below:
Expensive: while you may enjoy some freedom, you will be charged account fees ranging from $2000-10000 depending on the forex broker and managed trading account type.
Lack of flexibility: as your money is being managed by someone else, you will not have the flexibility of making decisions; however smart they may be.
Conclusion
Comparing the different types of forex trading accounts and their pros and cons has been simplified for you by this article.
The choice of a kind of trading account to use is purely a personal decision.
Choosing the best account for trading in forex depends on your capital, availability, investment preference, and risk tolerance.
Nevertheless, both beginners and consistent traders should test and practice their trading strategy at the free forex demo account before moving to live forex trading platforms for profits.
Must Read: Top online forex trading platforms 2020