Micro, Mini and Managed Forex Accounts
Most traders use a standard trading account because of the lot sizes you can use. However, there are other types of accounts you can get and many new traders wonder whether they are worthwhile or not. These accounts include micro, mini and managed forex accounts. Each of these accounts has benefits as well as drawbacks that you should know about.
The Micro Account
A micro account is the smallest account type you can get. The account allows you to trade with micro lots that are 1000 unit lots. The amount of capital you have to invest for this account is minimal and generally around $25 to $50. The benefit of this account is mainly geared to the new trader. All new traders should use these accounts when they start trading because they offer limited risk and an easy transition from demo account to live trading. The small lot sizes means you are not at risk of trading too large and risking too much. These account generally come with limited leverage as well. The main problem with this account is that you have limited lot sizes making profits very small.
The Mini Account
The mini account is slightly larger than the micro account and works with lots of 10,000 units. These lots allow you to do more on the market and the account usually comes with more leverage than the micro account. This is a good middle ground for traders who are not confident enough to trade with the standard lot sizes, but feel constrained by the restrictions of the micro account. The capital needed to open one of these account is less than for a standard account but more than the micro account. You generally have to have at least $100 to open one of these accounts.
Managed Forex Accounts
The managed forex account is one that has an account manager who does the trading for you. There are two types of managed accounts that you can get depending on your capital and your end goals. The first type is a pooled account where you and other investors pool your money and the profits are shared. The division of the profits is not equal and is based on the capital amount and the risk ratio of the investor. People who have a higher risk ratio will receive more of the profits.
The second type of managed account is the individual account. With this account you are the only investor and you receive all the profits. Of course, the capital needed to open one of these accounts is higher than the pooled account.
Managed trading accounts are ideal for people who do not want to trade at all. Of course, the manager of your account should be able to tell you how your money is being used should you ask them. The main drawback of this account type is the capital needed. Both managed accounts require much larger capital investments than the DIY micro and mini forex accounts.
The type of trading account you get depends on your capital and knowledge of the market. The amount of trading you actually want to complete should also be considered.