A brokerage account is a gateway to the world of investment. For trading on international markets – buying currency, stocks, bonds and other operations – it is a necessary tool without which it is impossible to conduct transactions. Accounts can be different, and which one is suitable for a particular client depends on the investment objectives. At the same time, a lot of customers want to find out why there are so many types of accounts. In this article, we will have a deeper look at this topic.
Different Types of Accounts
Before we start to explain why there are different types of Forex trading accounts, first we need to have a look at what accounts are available. There are four main types of accounts.
Account for Independent Trading
The first one is for independent trading. It is suitable for those who trade in the stock market themselves. As a rule, such accounts have the lowest commission on transactions. And the more funds there are, the lower it is. You can learn how to trade on your own by attending group or individual courses on the stock market.
The same can be said about Forex trading. Accounts for independent trading are somewhat similar to live accounts. The majority of brokers might offer even 5 different types, where conditions could be different. For example, this XM ultra trading account differs from its counterparts, by more appealing conditions, support and trading platforms. The more trading accounts are available – the better for brokers and customers.
Account for Consulting Support
The second type of account is with consulting support. That is, the client uses the advice of a broker, but at the same time performs the operations himself. A personal advisor advises on the entire spectrum of financial assets, monitors news and current investment ideas, monitors portfolio positions, controls risks and gives recommendations on adjusting positions. These invoices have an increased payment due to consulting support.
The third type is trust accounts. They are suitable for investors who do not have free time or desire to work in the stock market, but are willing to entrust their funds to professionals. The commissions for such accounts are comparable to the consulting ones. The difference is that decisions on transactions and all operations on the market on this account are made by the manager. The owner receives reports by e-mail or in his personal account and sees what operations were carried out and what results were obtained. For brokerage accounts of trust management, the broker receives remuneration for success and its size depends on various factors (from 15 to 60% depending on the company). This is the most profitable type of account. On average, the most affordable target is 15-25% per annum, high returns are possible and depend on the client’s willingness to take risks.
Individual Investment Accounts
The fourth type is an individual investment account. This is an interesting product. Within the framework of IIS, all the possibilities of a standard account are available, including independent, consulting and trust management. But the main highlight in tax breaks is that an investor can either exempt profits from income tax, or receive a tax deduction.
Why Do Brokers Offer Different Accounts?
There are a lot of reasons why particular brokers might offer various trading accounts to their customers. Below, we will have a look at the most important ones:
Imagine, you register on a broker’s website. There are different types of accounts. First of all these accounts have different trading conditions, such as spreads, leverage and minimum deposit. If you are an already established trader, with decent experience, you would choose the one with the best possible conditions. Novice traders would go for something easy.
When we talk about demo accounts, they help traders to train in a virtual environment, where there is no possibility of risking real funds. With that being said, if you do not know what to do, a demo account is a perfect way to understand the basics and improve the whole trading process, as well as test new strategies.
Islamic account is also a type of account, which is directed specifically towards traders that practice the Islamic faith. According to Sharia laws, there are some restrictions on trading, hence brokers offer swap-free accounts to Muslims. This type of account is widely used by people worldwide, and it is difficult to find a broker, which does not have the following account.