Introduction To Binary & Forex Brokerage Accounts
The choice of a Forex or a Binary trading account is the most important consideration for any investor. It is seen that companies and brokers operating in the global financial markets do not conform to a uniform code of practice, as there are different trader requirements and diverse broker strategies when it comes to maintaining the dynamics of demand and supply. Forex trading and binary options trading are some of the most popular investment channels in the industry that continues to grow at a staggering rate. These days, traders have access to some of the most powerful trading systems, high-speed internet connectivity, and the ability to trade on the move through superior mobile trading platforms via smartphones and tablets.
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Traders have varying needs that require custom-tailored access to accounts to take part in the markets in a convenient and reliable manner. Performance is the key to the overall profitability of a trader, as minute differences can mean the difference between a profitable and a losing trade. It is indeed refreshing to note that brokers realise the varying needs of its clients, and focus on providing different types of trading accounts to cater to specific trader requirements.
Although most companies have different account categories and options to customise accounts according to individual clients’ preferences, some brokers offer a one-size-fits-all solution to simplify the account signup process for its clients. Sometimes, traders may find it difficult to make an informed choice owing to multiple options that have varying levels of account features and benefits. In such scenarios, a single type of trading account can be beneficial in streamlining the account thought process, which can indeed help in conversions from the broker’s perspective.
Interrelation Between Forex & Binary Accounts
Forex and binary options trading are two different industries with their own distinct characteristics and unique trading features. Of course, both products have some similar traits that make them comparable to each other, but as far as trading accounts are concerned, brokers have developed entirely different types of accounts for both Forex and binary options users. Even brokers that offer both products as part of their services portfolio have created diverse account categories to suit the differing market requirements.
Traditional investors have also considered both Forex and Binary Options trading to be high-risk alternatives to the conventional forms of investments. The high-leverage trading of the Forex markets and the gambling resemblance of binary options trading have only added to the cause. Nevertheless, Forex enjoys a more reserved status and is considered to be a credible investment opportunity that is usually more preferred than the new and exotic binary options market.
Types Of Binary Options Trading Accounts
Binary options brokers are known to develop their accounts to suit the discerning requirements of binary options traders, rather than basing it out of accounts designed for Forex or any other conventional trading accounts. There are primarily three different types of binary options account types, which are available in different versions and combinations. Here are some of the more common account options provided by binary options companies:
Type Of Binary Options Account According To Initial Deposit
Binary options trading takes the concept of retail trading to a whole new level. Traders have the ability to invest in the markets with a minuscule amount of money, and it is not uncommon for brokers to offer binary trading accounts for as meagre a sum like $1. Nevertheless, brokers strive to create a brokerage account that concentrates on catering to all sections of the trading market, which is why brokers are known to develop different types of trading accounts according to the initial deposit amount.
Generally, brokers create three or five different categories of accounts, where the initial deposit amount determines the account category that is relevant to a particular trader. Brokers may often provide popular monikers for these accounts, such as Bronze, Silver, Gold, and Platinum accounts, or brokers might choose some subtle variations for naming their different account options. Regardless, the basic premise for receiving access to a higher category of account would be to make a substantial initial investment.
Type Of Binary Options Account According To Trading Conditions
Binary options brokers may offer different types of trading accounts according to the trading conditions such as access to financial instruments, types of binary options products, payouts, and cost of trading. Brokers may reserve their top-end trading account options with access to a comprehensive range of financial instruments, higher ROIs, and increased trading resources for VIP or premium account holders, in an attempt to entice traders into making a significant deposit. Some brokers may deliberately reduce the number of trading features and training materials for their lower account categories, so as to coerce traders into making an increased investment to jump up to a higher account category.
Several binary options brokers also categorise their account offerings according to the training materials, trading signals, market analysis, access to a personal financial analyst, and other trading benefits. It is also common for brokers to their high-end training materials and one-on-one tutorials for its premium account holders, which may create a better prospect for traders who are willing to receive expert assistance, at the expense of a higher initial deposit.
Type Of Binary Options Account According To Bonus Offered
One of the main allures of binary options trading is the availability of a bonus for making a deposit, which can offer up to 200% of the deposit amount as the available trading equity. Of course, some of the more established and regulated binary options brokers are turning away from the promise of free money, primarily due to regulatory constraints and new laws that prevent companies from offering any bonuses to its clients. Regardless, binary options bonuses have proven to be among the best in the financial markets, as a majority of brokers offer bonuses of up to 25%. In order to increase the investments made by a client, brokers may choose to create a deposit-based bonus program that promises a higher reward for a higher deposit. Hence, traders may also come across a bonus-based categorization of accounts, which may also come with a few additional account benefits.
Types Of Forex Accounts
Forex brokers were among the very first companies to embrace the concept of online trading by offering fully online trading platforms to retail traders, and have set a precedent for all future financial companies that currently deal in traditional stocks, commodities, and indices trading through an online brokerage service. Forex accounts are also used as a reference point by binary options brokers while developing new products, but the similarities end there. Forex accounts and binary options accounts are worlds apart, for obvious reasons, but it is normal for traders to witness some similarities between an FX account and a traditional stock brokerage account.
Unlike binary options trading, Forex trading involves several different trading concepts and advanced trading tools that require brokers to come up with different iterations of FX accounts to suit diverse trader needs. Although some brokers may choose to provide a single type of trading account for all of its users, it is usually an established norm in the market to divide FX trading accounts into different varieties, in order to create a better Forex trading environment. We have come up with some of the most common ways by which Forex brokers develop trading accounts suit the different Forex trading options available in the market.
Type Of Forex Accounts According To Tradable Lots & Leverage
The foremost concern while choosing a Forex trading account is the trader’s decision to choose his/her preferred trading conditions with respect to the lots used in trading. Unlike binary options, Forex trading contracts are opened in multiples of lots, which are differentiated into three major categories, the Micro, Mini, and Standard lot accounts.
A standard lot is a contract that involves trading with 100,000 units of a base currency (usually denoted in US Dollars for USD as the base currency in a pair), with a denominated pip value of 10 units per pip. Larger traders often carry out their trading activities using multiples of standard lots, but this type of trading usually involves a considerable amount of capital outflow. In most cases, standard lot accounts are reserved for larger traders and institutional investors, but brokers may offer the option of standard lot trading for smaller traders through the convenience of margin trading, also known as leverage. A leverage of 1:100 allows traders to open a trade using a standard lot for just 1000 units of base currency, while a leverage of 1:1000 can enable traders to buy/sell a standard lot for just 100 units.
Mini lot accounts are slightly smaller account options than the standard accounts, which allow traders to deal in lot sizes of 10,000 units with a nominal pip value of 1 unit. The Mirco lot accounts are the smallest account options that are developed for smaller traders, which have lot sizes starting from 1000 units and a nominal pip value of 0.1 units. Trading in Micro and Mini lots help in reducing the capital outflow quite drastically, but an increase in the leverage used can also increase the risk exponentially.
Since the leverage plays a significant part in the choice of tradable lots, brokers sometimes offer different trading accounts with variable leverages. The leverage also changes according to an increase in the account equity, as it becomes difficult for the broker to match the liquidity for larger position sizes. Brokers may automatically switch their traders to higher account categories if they see a consistent rise in the account equity, which is usually done free of cost.
Type Of Forex Accounts According To Trading Protocols
Forex trading has different trading protocols, namely the market maker protocol, the Direct Market Access Protocol (DMA accounts include Straight Through Processing [STP] and Electronic Communications Network [ECN]), and the hybrid protocol. Several brokers are outright market makers that transact all clients’ orders internally and may choose to act as a counterparty to a trader’s position. Market maker brokers or accounts have the highest conflict of interest between a broker and the trader, have limited liquidity, and have the highest spreads, which is why larger traders prefer to stay away from such accounts.
The Direct Market Access accounts, which include ECN/STP protocols, offer direct access to liquidity providers through ECN bridges, and ECN brokers simply choose to act as a middleman between the trader and the market. DMA accounts have the lowest spreads, the highest liquidity, no conflict of interest, and the best trading conditions, which make it the most preferred trading account for professional traders. ECN/STP accounts may have additional costs of trading such as commissions and a higher deposit requirement, but the overall reliability of DMA accounts makes it the popular choice among traders who can afford it.
Hybrid account protocols combine the market maker and the DMA protocols to offer a mixed trading environment. Hybrid account brokers may decide to pass clients’ orders directly to a liquidity provider or opt to pass it internally through an internal dealing desk, depending on the liquidity. Hybrid accounts have a medium level of conflict of interest, slightly higher trading costs than the DMA accounts, and overall stable trading conditions.
Type Of Forex Accounts According To Trading Platform
There are numerous Forex trading platforms in the market, but not all of them have the same set of trading tools and account features. A handful of FX brokers may have chosen to develop their own proprietary trading platform, while a majority of Forex companies have stuck to the tried and tested third-party trading platforms such as the MetaTrader4 (MT4), the MetaTrader5 (MT5), the cTrader, and the TradingStation. Trading platforms differ according to the choice of assets, trading features, account conditions, and other factors, which require brokers to create different types of trading accounts to suit their platform options. Brokers may also choose to offer dedicated brokerage accounts for users who wish to trade the FX markets on multiple platforms, thereby making it difficult for clients to choose a trading account on its merits alone.
Type Of Forex Accounts According To Initial Deposit
Forex brokers also choose to create different account categories for clients according to the extent of the initial deposit made into a trading account. Similar to the binary options accounts, Forex accounts may be split up into Bronze, Silver, Gold, or other Premium/VIP account categories for higher investments. Forex brokers normally allow its traders to deposit a minimum of $1 for a micro account, which can run into millions of dollars for institutional FX trading accounts. As is the case with all the other financial markets, Forex accounts may also reward its traders for higher deposits, mainly through account features and other trading benefits. Regardless, Forex brokers are not popular for offering any bonuses or other free promotions, but traders may enjoy loyalty programs, cash backs, and other account-based reward programs. Higher category account holders usually qualify for higher rewards and benefits, which provide access to increased cash rebates and other prizes.
Managed & Investment Forex Accounts
Managed and Investment accounts are more geared towards professional traders, but amateur traders, as well as seasoned investors, can also sign up for an investment account to invest their funds in a professionally traded account. These accounts are popularly known as PAMM or MAMM accounts, where professional traders manage traders’ funds by investing them in the markets and earning a share of the revenue generated through these investments. Investment accounts are available for both traders and investors and are known as Master and Slave accounts. Professional traders who manage funds on behalf of traders qualify for a Master account, while investors who wish to invest in these managed accounts can sign up for a Slave account.
Other Types Of Accounts For Forex & Binary Options Trading
Social Trading Accounts
The financial markets were revolutionised by the introduction of social media trading accounts in both binary options and Forex trading, which basically allowed traders to interact with each other and make a collective effort towards succeeding in the market. Social trading is quite simply an amazing tool that enables traders to copy the strategies of other successful traders, either for free or for a small subscription fee. Social trading accounts are only offered by a handful of Forex and binary options companies, which may diminish the number of available options to traders, but there are dedicated companies that allow its users to enjoy all the benefits of social trading tools to improve their trading results.
Demo Trading Accounts
Demo trading is a vital part of trading the markets that allow traders to experience the prospects of investing in the financial markets in a risk-free trading environment. Demo accounts are virtual trading accounts with virtual trading balances, which enable traders to trade the markets without worrying about losing their money or facing a margin call. A few brokers offer free and unlimited demo accounts for both binary and Forex trading, while some companies may limit access to these accounts to conserve their resources. In some cases, brokers may completely deny access to a demo account, in which case, traders must opt for other alternative brokers that offer an unconditional demo account for its users.
Traders have numerous account options when it comes to investing in both the Forex and the binary options market. Forex trading and binary options trading are two completely different products, and it is a difficult job to pick the best investment option between the two. It ultimately depends on a trader’s risk appetite and his/her investment strategies. It is imperative for traders to consider all the different options available to them, and make use of the demo accounts, before investing their money in a live trading account. Our expert Forex broker reviews and binary options broker reviews offer a detailed insight into the different account options and the trading features of individual brokers, which should help traders in making an intelligent choice for their trading needs.