There are several Forex account types, each with some peculiarities of its own. Choosing the right account depends on the risks you’re ready to take, starting investment amount, and the time you can spend. We’ll cover the existing types, their pros and cons, and how great a managed account is.
What types of Forex accounts are there?
So that you could understand the way Forex accounts work, we shall provide a brief description of each type. Read on for more!
Turnkey Brokerage Solution For Your Business
Get the most profitable fully licensed fx/crypto brokerage software or ready-to-operate business in 48 hours. Best-in-class web & mobile trading platforms, sales-driven CRM, full integration with MT4/5, and 150+ payment providers.
1. Standard Forex account
This is the most popular trading account because it supports multiple features. Users can usually access pairs with an amount from $2000 up to $100,000. However, the precise numbers vary with each broker, so you have to check the information on your provider’s website.
A standard account provides its users with specific leverage and margin rules. You’ll generally see a ratio of 100:1. This means that opening a margin position will require only $1,000 for a regular trading lot. Remember that you boost both income and losses!
Advantages of a standard account:
- A wider variety of services and additional perks for individual traders;
- Easier to earn more money because each pip is worth $10, meaning huge potential.
Disadvantages of a standard account:
- Big minimum deposit (from $2,000), meaning you have to spend more money on investment;
- Boosted profits also mean increased losses because the position can also move against you.
Thus, always consider the pros and cons when choosing this type.
2. Mini Forex account
A Forex mini account is one that lets traders apply mini lots. This usually involved 1/10 from the standard size, meaning $10,000 from the regular amount of $100,000.
It’s an account type that is also often provided by many brokers. The catch is that it is made for hesitant traders who don’t want to invest too much money at once. You could think of it as a trial of the service, but one where you can both earn and lose funds.
Advantages of a mini account:
- Reduced risks for traders because they trade with smaller lots, meaning it’s a great possibility to check out the platform or test a new strategy;
- Significantly lower minimum investment amount, usually starting at $250 because the money is leveraged at a rate of 400:1;
- Ability to diversify portfolios because traders can buy more positions at a low price.
Disadvantages of a mini account:
- Reduced rewards because mini accounts require smaller investments; thus, they provide small pip prices.
So, a mini account is great when you decide to check a broker and test a new strategy. However, it isn’t the best choice to earn a decent sum.
3. Managed Forex account
The last account type is the managed one. In this case, you own the money, but someone else invests it. Usually, an account manager, who is an experienced trader who works to achieve your goals, is responsible for the process.
Managed Forex accounts are divided into two groups:
- Pooled funds
- Individual accounts.
The first option, a pooled funds account, is where the money is stored in a mutual fund with a huge number of investors. The manager trades with this amount, then the profits or losses are divided among the whole group. Of course, such investments come with much higher risks, but the rewards are better too.
Individual accounts are where the manager works with each trader’s account separately. It’s usually a safer option with reduced risks. However, as you might have already guessed, a lower risk ratio also means fewer rewards. Nevertheless, that’s still great if you’re looking for a stable source of income.
Advantages of a managed account:
- A professional trader works with your funds, meaning that you get much better rewards;
- A perfect option to diversify your portfolio without the need to monitor the market 24/7.
Disadvantages of a managed account:
- Remember that managed accounts always need investing higher amounts, and you’ll also have to pay the managers a percentage from the income;
- Since you’re not the person who manages the account, there is no flexibility, meaning you won’t be able to change a position when you see a profitable move.
Therefore, a managed Forex account removes the burden of monitoring the market, but it also comes at a costly price. You don’t control the manager’s actions, and it requires a decent amount to invest in such an account.
Is using a managed Forex account profitable?
Generally, yes, using a managed account would be pretty profitable. A lot depends on the provider you choose, but decent services are a great source of income. You can expect to earn the same average amount you’d get from manual trading on your own.
If the manager is really a master of trading, then it is most likely that you’ll earn 20% from the invested amount each month. Some people even manage to get 1,000%, but these are real diamonds. Don’t forget that they could also lose money, so you should choose wisely.
The only requirement is that you find a reliable trader or broker who wouldn’t scam you. There are hundreds of frauds on the internet, so it is necessary that you are as cautious as possible. Otherwise, your funds will become someone else’s property!
How to choose a Forex account manager?
There are several steps to seeing whether a Forex account manager is trustworthy or a common fraud. Follow the steps below to avoid getting scammed.
1. Surf the web
Before even contacting the service provider, do some research of your own. Try googling their name and finding some reviews online. Their absence, obvious fakes, or negative comments are already a red flag.
However, that is only one element in your test. You still have to follow some other steps to get a 100% guarantee about your decision.
2. Check the “Calmar Ratio”
The Calmar Ratio is used to estimate a trader’s efficiency. A high ratio means that the investor gets positive results. Anything higher than 0,5 is considered to be okay, while a ratio of 3,0 – 5,0 is an excellent result. A low ratio means the trader brings a lot of losses, and that’s definitely something we don’t want.
3. Ask about the strategy
Now that you’ve done some research contact the service provider with several questions. The most important part would be to ask them to provide a brief explanation of their strategy. Ideally, you’d also want to see some real-life cases that would be proof that the strategy actually works.
4. Check out the price
If the previous steps showed that everything is fine, it is time to talk business. Now, you need to know how much you will be charged for the whole deal. For example, someone charges a fixed price while others would like a percentage from each profit. Of course, it depends on the service provider, and you are obliged to know these details. After all, we’re talking about your money.
5. Ask about accessing your account
The last thing you should find out is the way you’ll access your account and withdraw the funds. Some traders might provide monthly reports, while you’d definitely want to see the process transparently. Getting access to the account at any time means you’ll see how everything works from the inside.
Additionally, this also means you’ll have the possibility to invest and withdraw money whenever it is required. If you see a great opportunity for investment, you can add some funds to buy the asset. On the contrary, withdrawing money for any reason should be a matter of several clicks.
Where can you find a Forex account manager?
There are multiple places where you can find a mentor and a manager. It all depends on how hard you search. Generally, we could point out the following options:
- Brokerage companies;
- Trading forums;
- Individual traders;
- Social media.
The safest option is always a brokerage company because it complies with many regulations and often has a ton of reviews. That is, of course, if the company is legal. An illegal offshore brokerage service would simply rip you off, so be careful.
Trading forums and individual traders are great places to find experts. You may see their messages and writing there, meaning that estimating their expertise shouldn’t be an issue. Besides, you can also check how old certain accounts are. The older the account, the more information you can find about it. Frauds don’t live long!
Finally, social media is another place to search for experts. This is where you can find managers of all kinds. Note that it is a less reliable source when compared to forums because you don’t get complete information about the trader. You need industry-related info, not personal publications with cats and dogs.
Manage Forex accounts with XCritical’s CRM!
If you provide Forex account management services, then you definitely need a powerful solution to keep all data in one place. Mixing data is too easy when it’s unstructured, so XCritical’s Forex CRM can do the job. We can develop any custom customer relationship management platform.
Why should you choose XCritical?
- One of the leading technology providers in the Forex industry.
- Many years of experience in trading crypto, stocks, and other assets.
- A team of dedicated experts who know their job inside-out.
- Reasonable pricing for every project.
You get multiple benefits like top-notch software, custom solutions, and maintenance throughout the whole process. It’s always a win-win situation.
Don’t let your competitors get the lead. Schedule a demo today!
