What are the different types of trading accounts you can set up?

When opening a new account to trade stocks, forex and other types of assets, you will need to select an account type best suited to your financial investment requirements. Account types can differ based on your skill set, knowledge, experience and deposit size.

If you have opted to speculate on markets without actually directly owning the underlying security, you will want to tailor your account for spread betting. This is where you trade on margin and use leverage to increase the size of your bets. You can go either long or short on stocks and currency pairs and use instruments like stop losses to exit the market at the right moment.

By researching the best spread betting brokers, you will be able to select a brokerage that has a platform and feature set that will enable you to conduct your spread bets and manage your portfolio in the best possible way.

Standard trading account

A “standard” trading account is the most widely used by traders as these usually offer everything that is needed to make moves in stocks and forex. When trading currencies, a standard account allows investors to access lots worth $100,000 with ample leverage so you can work with a smaller amount of capital.

Because you need to meet a larger deposit amount than, for example, “mini” accounts, brokers offer additional perks and services to make the service more compelling. Standard accounts also offer both greater gain and loss potential compared to more basic accounts.

Mini trading account

When trading forex, you can also complete transactions using mini lots with a lower risk trading account that requires less capital upfront. Mini accounts are ideal for beginners who may not want to trade full lots when they first start out and are reticent about depositing a larger sum of money.

Mini accounts can be used to test new strategies and to trade assets without the fear of losing an account with a few ill-advised moves. However, the lower risk means there is less chance of making larger profits. In forex, these accounts may only produce a $1 per pip movement, for example.

Trading instruments

Account types are very much dependent on deposit sizes, but the available trading instruments are also a factor. When opting for an investment account, you may only have access to stocks and ETFs, while a broader trading account includes things like currencies, commodity futures, CFDs and index futures. Due to the lack of leverage, investment accounts are not suited to spread betting.

Features and customer service

When deciding on an account, you should consider the level of service and trading platform type. MetaTrader 4 accounts are built specifically for forex, while MetaTrader 5 is best suited to stocks. When making a larger deposit and signing up to a VIP or premium account, you may get access to more features and better customer support.

To find the right broker and account for your spread betting activities, you need to carefully consider what platform, services and features you need to make trades and then opt for one that is right for your circumstances.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes