Based on the execution types, customer priority, account functionality, multiple types of forex trading account is available from the brokers. Before start trading, learn about each different type of forex trading account.
Forex Standard account
Forex standard account is the most basic type of trading account. With this account, a trader will get a standard level of spread for all major currency pairs. The average spread on this type of account stays between 1 pip to 3 pips for EURUSD (varies from brokers to brokers).
The standard account does not have any trading commissions. A trader only needs to pay the spreads. This kind of account sometimes gets termed as a Pro trading account. The concept is almost the same, just spread gets lower and required a higher deposit.
Forex Cent account or Micro account
This type of account is very popular among all new forex traders. Because it is good for practicing the forex market with a small amount of deposit and still getting the real feel. Cent account deposit starts from 0.10 cents or $1.00 only.
In a cent account, $1.00 equals $100. Thus if a trader deposits $10.00 it will be indicated as $1000 in his/her account balance. Cent account spreads are the same as standard account spread, some broker also provides ECN cent account with a trading commission and lower spread.
Cent accounts are widely used in an automatic trading system for testing a trading strategy with lower risk.
Forex ECN account:
ECN stands for Electronic Communication Network. Which provides market pricing structure with lightning-fast execution of trading orders. ECN orders are automatic and it gets immediately executed as soon as trader press the buy/sell button from their trading platform. This kind of account usually has a lower spread on major pairs compared to standard account spread.
Some brokers have almost zero spread with EURUSD. But, with the ECN account, you have to pay a trading commission. These trading commissions get calculated as per standard lot size. For example, $4 per lot commission. ECN account is popular among forex scalers.
Round lot means, when you open a buy trade broker will charge $2 and when you will close the trade by selling it back, they will charge $2 again. So in short $4 per round lot commission. By default, if nothing mentioned, then it is considered a round lot.
Forex STP account:
STP stands for Straight Through Processing. With STP account trading speed is also faster like ECN account. Forex STP account does not have any middleman(.i.e broker) to intervene in the pricing of the orders.
Generally, when a trader presses the buy button, the broker sees clients trading orders at a certain ask price, then the broker decides the price and returns the order.
In the case of an STP account, the trader order gets directly transferred to the bank (liquidity providers) then automatically chooses the best offer from the bank and returns it to the trader.
Forex DMA account:
DMA stands for Direct Market Access, where traders get direct access to the market volume. It is mostly similar to STP account types. But with DMA trader get access to the DOM (Depth of the market).
With Depth of Market, a trader can view all trading volume of that broker. DMA accounts are usually better for institutional investors who trade daily, in a large volume. DMA has better transparency among all types of trading account. But usually required a higher deposit.
Forex VIP account:
The VIP account is broker specific special account type for institutional traders. Deposit with this account usually starts from $50,000 with zero spread and lowest trading commissions.
VIP account holders get personal account managers, who can manage your trade on your request. The top priority of customer support. Plus VIP account holders get a free subscription to many premium trading services, like free VPS (Virtual private server).
Forex Market maker:
Market makers are the type of brokers, who decides at which price you will receive your orders. For example, if you place a sell order at a certain bid price, then the market maker broker will be the middleman to judge where they should give you the order at the rate you asked for or at a different rate. Generally, most of the 4 digits brokers are a market maker.
Generally, trade order execution happens in two ways.
With instant execution, when you will press the buy/sell button, your order will be sent to the broker and it will get executed instantly if the broker has your bid/ask price available to execute. Else, you will receive a requote. Then again you need to resend your trade order to the broker.
That’s why during forex news release or any turmoil event, a trader with instant execution receives lots of requotes.
With market execution, your order will get executed directly with the liquidity providers. The broker does not interfere here. Once you will send the order, you will receive the best price from a pool of orders with different liquidity providers.
With market execution, you can not set stop loss ahd take profit at the time of entering the order. You can set it after executing the order.