Choosing an Account Type: A Complete Guide for Forex Traders

Are you new to trading and unsure which account type suits you best? Or maybe you've been trading for a while but still wonder if you are using the right one? With so many options available, it can be confusing to figure out which account matches your needs and trading style.

That's why we have put together this guide. Understanding the differences can have a big impact on your overall experience and profitability. Let’s dive in and find the right fit for you!

Understanding Trading Account Types

When you start exploring forex and CFD trading, you will quickly notice that brokers offer multiple types of accounts. But why do they do this? Simply put, not all traders have the same needs, experience, or goals.

A beginner who wants to practice with small amounts of capital will have very different requirements compared to an experienced trader looking for advanced features and tighter spreads. By offering these options, brokers aim to provide solutions for traders at every level.

Example Scenario: Standard VS ECN Account

To better understand the theoretical part, let’s compare Standard and ECN accounts on an example trade.

Details:

• Deposit: $3,000
• Trading Instrument: EUR/USD
• Leverage: 1:500
• Number of Lots Traded: 5 (standard lots)
• Holding Period: Short-term intraday trades (no overnight swaps applied)

Using a Standard Account

Account features:

• Minimum Deposit: $10
• Commission: $0
• Spread: 1.2 pips
• Leverage: 1:1000 (but trader uses 1:500)
• Stop Out Level: 30%

For more information, please check the trading accounts comparison table. 

Spread and other fees:

1 pip = $10 per lot on EUR/USD

• Spread of 1.2 pips means the cost per lot = $10 x 1.2 = $12
• For 5 lots: $12 x 5 = $60 total cost
• Total Trading Cost: $60

Conclusion:

The trader benefits from commission-free trading but faces a higher spread. This type of account might be suitable for traders who prefer simplicity and minimal upfront costs.

Using an ECN Account

Account features:

• Minimum Deposit: $10
• Commission: $7 per lot (Forex)
• Spread: As low as 0 pips
• Leverage: 1:1000 (but trader uses 1:500)
• Stop Out Level: 30%

For more details, please refer to the trading accounts comparison table.

Spread and other fees:

• Spread of 0 pips means no direct cost on spreads: $0
• Commission Cost:
• $10 commission per lot
• For 5 lots: $10 x 5 = $50 total commission
• Total Trading Cost: $50

Conclusion:

The trader benefits from lower spreads but incurs a fixed commission fee. This type of account is ideal for investors who prioritize lower spreads and faster execution. ECN accounts are indispensable assets, especially for high-volume traders.

Key Factors to Consider When Choosing an Account Type

Several important factors should influence your account preference:

Your Trading Goals

Are you looking to trade occasionally for an extra income, or are you planning to become a full-time trader? If your goal is long-term investing, you might need an account with low overnight fees. On the other hand, day traders might prioritize fast execution and tight spreads.

Level of Experience

New traders often benefit from accounts with smaller lot sizes and lower initial deposits, such as micro or cent accounts. These accounts allow beginners to gain experience without risking large amounts of capital. Meanwhile, experienced traders might prefer ECN or Pro account for the best trading conditions and direct market access.

Amount of Capital

How much are you willing to invest? Standard accounts typically require higher deposits, while micro or mini accounts allow you to start with smaller amounts.

Trading Costs and Fees

Different accounts come with varying fee structures. Some have wider spreads but no commissions, while others offer raw spreads with commission charges.

Leverage Options

Some accounts offer higher leverage, which can increase both potential profits and losses. If you're a beginner, lower leverage accounts can help you manage risk easily.

Special Requirements

If you have specific trading requirements, certain account types may better suit your needs. For instance, swap-free accounts are designed for traders who prefer to avoid interest-based fees in accordance with their financial or religious principles.

Most Common Forex & CFD Trading Account Types

Below, we will explore the most common account types, their key features to help you decide:

Standard Account

Also known as STD or Regular Trading Accounts, these accounts are ideal for intermediate traders with some experience who seek a balance between trading costs and convenience.

Key Features:

• Lot Size: Standard lot (100,000 units)
• Deposit Requirements: Moderate to high initial deposit
• Spreads: Variable, generally wider than ECN
• Commission: Typically, commission-free but includes spread markup

Mini Account

This option is ideal for traders with moderate capital who want to trade smaller lot sizes while still experiencing real market conditions.

Key Features:

• Lot Size: Mini lot (10,000 units)
• Deposit Requirements: Lower compared to Standard accounts
• Spreads: Slightly wider than Standard accounts
• Commission: In most cases it’s commission-free

Micro Account

This account type is perfect for beginners who want to gain real-market experience with minimal financial exposure.

Key Features:

• Lot Size: Micro lot (1,000 units)
• Deposit Requirements: Very low, making it accessible to beginners
• Spreads: Wider than Standard and Mini accounts
• Commission: Usually commission-free

Cent Account

This account type measures balances in cents instead of dollars, making it an excellent choice for those looking to practice trading with very low financial exposure.

Key Features:

• Account Balance: Measured in cents instead of dollars
• Deposit Requirements: Extremely low, ideal for learning purposes
• Spreads: Can be wider due to smaller trade sizes
• Commission: Typically, no commission

ECN (Electronic Communication Network) Account

Known as an ECN or Zero Spread Account, this account type provides direct access to liquidity providers without any dealing desk intervention, offering tight spreads and fast execution.

Key Features:

• Lot Size: Standard or Mini
• Spreads: Raw spreads starting from 0 pips
• Commission: Fixed commission per trade
• Execution: Direct market access with no dealing desk

STP (Straight Through Processing) Account

Referred to as an STP Trading Account, this account type routes orders directly to liquidity providers, ensuring transparency and efficient execution.

Key Features:

• Lot Size: Varies depending on the broker.
• Spreads: Competitive, without a dealing desk.
• Commission: Often commission-free.
• Execution: Direct routing to liquidity providers.

Swap-Free Account

Also called an Islamic Trading Account, this type is designed for traders who prefer to avoid interest-based charges in line with their financial or religious frameworks.

Key Features:

• Overnight Charges: No interest (swap) fees applied.
• Deposit Requirements: Could be slightly higher than Standard accounts.
• Spreads: Slightly wider due to the absence of swap charges.
• Commission: Sometimes it includes administrative fees instead of swaps.

Managed Account

Known as a Managed Trading Account, this option allows professional traders or portfolio managers to handle trades on behalf of the account holder.

Key Features:

• Professional Management: Trades are executed by experts.
• Deposit Requirements: High, depending on the service.
• Fees: Performance-based or management fees.
• Transparency: Regular reports on performance.

Pro Account

Also called a Professional Trading Account, this option is tailored for experienced traders and institutions requiring premium trading conditions.

Key Features:

• Lot Size: Standard or larger
• Deposit Requirements: High
• Spreads: Ultra-tight
• Commission: Competitive fees for high-volume trading
• Leverage: Higher leverage options available

FAQs on Trading Account Types

Here are some common questions traders often have. Do not hesitate to contact our support team if you have any questions!

What is the best account type for beginners?

Beginners often benefit from starting with a Micro Account or Cent Account. These accounts allow trading with smaller lot sizes, minimizing risk while gaining real-market experience. As confidence and proficiency grow, traders can consider transitioning to Standard or other account types.

Can I switch my account type later?

Yes, most brokers allow traders to switch account types. The process varies. Some may require opening a new account and transferring funds, while others allow account transitions.

Do all brokers offer the same account types?

No, account offerings differ among brokers. While Standard, Mini, and ECN accounts are common, some brokers provide specialized accounts like Islamic (Swap-Free) or Managed Accounts.

How do ECN and STP accounts differ?

Both accounts provide direct access to liquidity providers without a dealing desk. The primary difference lies in execution:

• ECN: Offer a marketplace where multiple participants can interact, often resulting in tighter spreads but with added commissions.
• STP: Route orders directly to liquidity providers, with costs typically embedded in the spread, leading to potentially wider spreads but no additional commissions.

Are swap-free accounts interest-free?

Yes, Swap-Free Accounts are designed to comply with financial principles that prohibit earning or paying interest. Instead of overnight interest charges, brokers may apply commissions or adjust spreads to accounts for holding positions overnight.

How much capital do I need to start trading?

Minimum amount of capital varies by account type and broker. Some brokers offer minimum deposits as low as $10, while others may require higher. For more information check related article: How Much Money Do You Need to Start Trading?