In the foreign exchange Melbourne market, you have the choice of a range of trading accounts. The one commonly offered by forex brokers include mini, standard and managed. The type of account you choose is dependent upon your risk level, the amount of time you have to trade and the size of your initial capital investment.
This type of account allows you to make transactions with the use of mini lots. Most brokerages offer mini lots that are equivalent to $10,000. Many brokers choose to offer this account as an attraction to traders who do not feel confident enough to trade in standard lots due to the risk involved and the added capital investment.
The advantage of this type of account is that you are able to trade without the risk of losing huge amounts of funds. This account can be opened with $250 to $500 and is offered with very high levels of leverage.
The disadvantage to this account is that with low risk you will obtain low reward. A movement of one pip in this account is only worth $1.
These accounts are normally suitable for beginners in the foreign exchange Melbourne market or those who are looking to test new strategies with smaller amounts of trade.
Standard Foreign Exchange Melbourne Account
This is the most common account in the forex market. Each standard lot is worth $100,000. This does not mean that you require that amount of money in your account as the use of leverage will lower the amount of funding you need to have available.
This type of account normally comes with additional services and tools. Each pip is worth $10 which makes your profits or losses larger than the mini account. The investment capital required for this type of account ranges from $2,000 to $10,000. This is dependent upon the brokerage firm you choose to register with.
This account is suitable for most traders, particularly those with experience in the marketplace.
With a managed account, you provide the capital, but you do not make the decisions regarding your trades. You have account managers who handle all the daily tasks related to your trades. All you have to do is set your risk management levels and profit goals and your account manager will strive to meet your requirements.
You have the option of two types of managed accounts. The first is a pooled fund where your money is added to a fund with that of other investors and you share the profits that are made. The accounts are categorised by risk tolerance.
The second type of account is an individual account where you have a specified broker who handles your account personally. Your broker will make individual decisions for your account and criteria, rather than investing for a group of people.
The advantage to this type of account is having a professional who handles your account. This gives you the opportunity to diversify your investments without having to spend copious amounts of time on analysing the markets.
The disadvantage to this account is that your initial investment capital is much higher than managing your own account. You will also be required to pay a commission on a periodic basis. You will not have the facility to place or withdraw positions as you see fit. This is done by your account manager only.
Regardless of the type of account you choose, it is advisable to test it before you make a final decision.
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