How to choose a trader trading account. Features of trading accounts.

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How to choose trading account for trader

The career of any online trader begins with some preparations involving choosing a trading platform, analytical tools and a technical strategy for forecasting the market. However, among these, one of the most pressing problems is directly related to the financial question. We are talking about opening a trading account. What account do beginners need, how much funds are necessary for trading and, out of the services available online, what are the advantages of certain types of investment accounts over others or what can trading platforms offer you in this case? It is these very topics that will be explored in this article.

First and foremost, when beginning to discuss the choice of trading accounts, it is important to mention the related problems that can arise. Firstly, the question of security should be at the forefront of the mind of any trader when choosing a trading account. The problem being that a lot of fraud takes place in this field. It is simply impossible to avoid fraudulent dealers willing to get their hands dirty in such an attractive field with as much financial potential as trading. Considering the fact that there is significant capital present on the market and every investor injects their own personal means, the question of security should be the first thought in your mind.

Online trading is conducted on the specialized platforms of companies who provide service in this field. These companies in particular answer for their clients’ funds and take security measures to safeguard them. That being said, there is such a wide variety of dealing centers for online trading today that illegal services have little trouble hiding amongst them. Illegal services whose singular aim is to blatantly steal the investment funds of traders. Therefore, before opening a trading account on any platform, you need to research it in-depth. First and foremost, check if the trading service is licensed by a regulator. This helps ensures you as much as possible against the possibility of losing funds, even if the company goes bankrupt. Besides that, when you choose a licensed platform, you get to work on the most professional, well-equipped trading services. Don’t rush to open an account, research all the aspects of partnering with them, as well as the reputation of their information database, as you will be conducting your activity based on this information.

The second question you need to consider when opening a trading account is choosing a trading tool with which to operate on the market. Today there are an entire variety of tools for online trading:

● SDF contracts – This type of exchange trading position is offered on the platform Forex. Using this tool, you can conduct financial operations and generate profit on any available asset, be it stocks, currencies, indexes, or cryptocurrencies.

● Over-the-counter fixed-term contracts – This is a relatively specific tool that became available fairly recently under the name “binary options”. This is also a universal trading tool that gives you the opportunity to work with the rates of any assets, including classic ones

● Trading cryptocurrencies –This is a relatively specialized trading regime. The reason for this is that you can conduct operations where you directly purchase and exchange crypto coins with classic fiat currencies. At the same time, the crypto industry provides the opportunity to work in a marginal trading regime close to the format of SDF contracts, where you don’t obtain the asset, only utilize its fluctuation on the market to generate profit

There are specialized platforms for each direction of trading with their own assortment of trading accounts and specific advantages provided.

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So, let’s explore in more detail what kinds of account trading platforms offer in the various types of trading, starting with the futures market.

Types of accounts for over-the-counter fixed-term contracts

The vast majority of companies on the futures market offer several basic types of trading accounts that provide traders with various opportunities and service for working on the market. By the way, it is important to mention that the classification of live accounts based on their access to trading tools and starting capital required is a marketing draw for traders. Therefore, when figuring out which type of live account if best for you, don’t decide only based on how attractive the conditions are. It is vital that you take into account both how suitable the financial conditions are for you, as well as making sure that the technical indicators provided on the account fit your trading style.

So, the futures market offers the following types of trading accounts:

● Demo account

Companies don’t require you to deposit any funds to open a demo account. It is free to register and use a training account. This is where new, as well as seasoned traders, get access to the following services:

● A full-fledged trading terminal with access to every technical resource imaginable

● The ability to use virtual funds for training, be it $1,000 USD, €1,000 EUR, or ₽50,000 RUB, the balance is not limited

● A full selection of information databases

● The ability to participate in tournaments held on demo accounts with real cash prizes

Standard account

This type of account offers the minimal conditions to begin trading live on the company’s platform. You need the minimal investment deposit required in order to open a standard account. On average, it starts from $10 dollars (this can vary depending on the platform, but overall these are likely to be the conditions).

On these accounts, traders gain access to an optimal selection of service, including:

● The complete live version of the trading terminal

● Access to all trading assets

● High profitability of trading positions, up to 90%

● The ability to place contracts starting from $1 dollar

● The company’s basic bonus offers

● Professional technical support for clients

● The option to participate in contests and tournaments

● The ability to withdraw funds in 3 working days 4

Gold account

You need to deposit at least $500 dollars of starting capital to gain access to this trading account level, that or achieve this balance through working on the market. To put it simply, as you grow professionally, so will your financial status on the trading platform. Here, in addition to the services listed above, clients gain the following benefits:

● A wider range of financial assets for trading

● Increased profitability of positions, up to 90%

● More lucrative bonus programs

● Insurance on trading contracts

● Reimbursements for trading losses, up to 5% a week

● The option to receive professional consultations from your personal professional manager

● Compensation for losses, up to 5-10%

● Monetization of trading funds in 4 hours

VIP account

This is the highest level of live accounts and, as follows, clients of this level have access to the best tools and services. In order to achieve this status, you need to have at least $1,000 dollars in your account. VIP clients gain the following advantages:

● Contract profitability of 95% (fixed for all positions)

● A complete list of basic trading assets

● Bonuses amounting to 100% of your deposited trading capital

● Working with a personal manager on an ongoing basis

● Reimbursements for losses of up to 15% per week

● A range of exclusive services

● Monetization of funds within 4 hours

As you can see, futures trading platforms for over-the-counter contracts offer a selection of accounts suitable for all tastes and wallet sizes. Other than the standard accounts, on some services you will finds more exclusive types of accounts for very wealthy clients. Typically, these conditions are accessible from $10,000. In these cases, the conditions of the partnership are discussed on a case-by-case basis.

The Forex Market

This type of online trading platform closely resembles the futures market in terms of available accounts. The vast majority of services offer the following trading conditions:

Standard

This type of account requires the minimum starting deposit, beginning from $1 dollar, although there are more professional services available that require a minimum starting capital in the range of $300-$500 dollars. When working on this type of account, you gain the following opportunities:

● The ability to work with basic financial assets

● Leverage of 1:1000 or 1:2000

● The standard selection of analytical services

● Profit withdrawals in 3-5 working days

Gold/Premium

You need to have a minimum of $500-$1,000 dollars in your account to achieve this trading account status, on some platforms it can require as much as $3,000-$5,000 dollars. With this status, investors gain a wider selection of opportunities:

● A wider selection of assets

● A lower level of commission

● The largest market analysis toolkit

● A professional analyst

● Cash back up to 5%

● An increased number of trading positions that can be open on the market at any given time

● Monetization of profits in 1 working day

VIP or PRO

Traders reach this status when they open an account with $1,000 dollars of starting capital ($5,000 dollars on some services). By opening this type of account, traders gain access to the widest and most exclusive range of opportunities for generating profit:

● Unlimited access to trading assets

● The widest selection of technical analysis tools

● Special opportunities on the trading platform

● A personal analyst

● Professional trading signals

● The support of a professional manager

● Cash back up to 15%

● Individually-tailored partnership conditions

When considering the types of accounts on Forex, it is worth mentioning that there is a limit to the amount you can use for an initial deposit, nearly all platforms set this at $50,000 dollars. It is thought that investors with such financial clout should be working on exchange platforms directly with personal brokers. In reality, the reason for this is to create safe conditions for the trading platform itself to function. When working successfully with such capital, the investor could bankrupt the platform.

The cryptocurrency market

Trading platforms that work on the market are not only innovative but extremely liberal in terms of the selection of live accounts and the accompanying conditions for conducting operations. You will not be limited in your access to certain assets or technical functions of the trading service. The companies also don’t place a limit on the maximum investment or cost or trading contracts. The only condition for working on the cryptocurrency market is the total starting capital, which typically starts from $10-$50 dollars. Following this, all clients work under identical conditions. Other than replenishing the trading account with fiat currencies, they logically provide accounts that can be replenished directly with various types of crypto coins.

Conclusion

As you can see, online trading provides a wide assortment of trading tools, as well as a multitude of technical financial conditions for conducting market operations. Using this list of accounts, any investor can find the trading account most suited to their preferences and financial capabilities. Besides that, they can increase their trading opportunities on higher status accounts, providing an additional stimulus for professional growth as an online trader.

“General Risk Warning: Binary options and cryptocurrency trading carry a high level of risk and can result in the loss of all your funds.”

Forex Basics: Setting Up an Account

Foreign-exchange (forex) trading consists of buying and selling world currencies, and the marketplace is among the most liquid in the world. Forex trading is unique because individual investors can compete with large hedge funds and banks—they just need to set up the right account.

There are three main types of trading accounts—standard, mini, and managed—and each has its own advantages and disadvantages. Which type of account is right for you depends on your tolerance for risk, the size of your initial investment, and the amount of time you have to trade on a daily basis.

Key Takeaways

  • If you’ve started trading in the forex markets, you’ll need to choose what type of account is best-suited to your skill, knowledge, and experience.
  • The most common is a standard account with 100:1 leverage and standard lots up to $100,000 in notional value.
  • Mini accounts reduce the maximum lot size to just $10,000 are intended for beginners, more risk-averse traders, or those with limited funds.
  • For those who rather have a professional portfolio manager make your trades, a managed account might be worth the additional fees.

Standard Trading Accounts

The standard trading account is the most common. This account gives the user access to standard lots of currency each worth $100,000.

That does not mean that you have to put down $100,000 of capital in order to trade. The rules of margin and leverage (typically 100:1 in forex) mean that only $1,000 needs to be in the margin account for one standard lot to be traded.

The Pros

Service: Because the standard account requires adequate up-front capital to trade full lots, most brokers provide more services and better perks for individual investors who have this type of account.

Gain Potential: With each pip worth $10, if a position moves with you by 100 pips in one day, the gain will be $1,000. This type of gain is not possible with any other account type unless more than one standard lot is traded.

The Cons

Capital Requirement: Most brokers require standard accounts to have a starting minimum balance of at least $2,000 and sometimes $5,000 to $10,000.

Loss Potential
Just as you have the opportunity to gain $1,000 if a position moves with you, you could lose $1,000 in a 100-pip move against you. This loss could be devastating to an inexperienced trader with just the minimum in an account.

This type of account is recommended for experienced, well-funded traders.

Mini Trading Accounts

A mini trading account is simply a trading account that allows traders to make transactions using mini lots. In most brokerage accounts, a mini lot is equal to $10,000, or one-tenth of a standard account. Most brokers offering standard accounts will also offer mini accounts as a way to bring in new clients who are hesitant to trade full lots because of the investment required.

The Pros

Low Risk: By trading in $10,000 increments, inexperienced traders can trade without blowing through an account, and experienced traders can test new strategies without risking too much capital.

Low Capital Requirement: Most mini accounts can be opened with $250 to $500, and they come with leverage of up to 400:1.

Flexibility: The key to successful trading is having a risk-management plan and sticking to it. With mini lots, this is a lot easier to do because if one standard lot is too risky, you can buy five or six mini lots and minimize your risk.

The Cons

Low Reward
With low risk comes low reward. Mini accounts that trade $10,000 lots can only produce $1 per pip of movement as opposed to $10 in a standard account. This type of account is recommended for beginning forex traders or those looking to dabble with new strategies.

Micro accounts, the sister account to the mini, are also available through some online brokers. These accounts trade in $1,000 lots and have pip movements worth 10 cents per point. These accounts are typically used for investors with limited foreign exchange knowledge and can be opened for as little as $25. (Read “10 Things to Consider Before Selecting an Online Broker before making your investment.)

Managed Trading Account

Managed trading accounts are forex accounts in which the capital is yours but the decisions to buy and sell are not. Account managers handle the account just as stockbrokers handle a managed stock account, where you set the objectives (profit goals, risk management) and the managers work to meet them.

There are two types of managed accounts:

  1. Pooled Funds: Your money is put into a mutual fund with that of other investors, and the profits are shared. These accounts are categorized according to risk tolerance. A trader looking for higher returns would put their money into a pooled account that has a higher risk/reward ratio while a trader looking for a steady income would do the opposite. Read the fund’s prospectus before investing.
  2. Individual Accounts: A broker will handle each account individually, making decisions for each investor instead of the combined pool.

The Pros

Professional Guidance: Having a professional forex broker handle an account is an advantage that cannot be overstated. Also, if you want to diversify your portfolio without spending all day watching the market, this is a great choice.

The Cons

Price: Be aware that most managed accounts will require a minimum $2,000 investment for pooled accounts and $10,000 for individual accounts. On top of this, account managers will keep a commission, called an account maintenance fee, which is calculated per month or per year.

Flexibility: If you see the market moving, you won’t have the flexibility to place a position. Instead, you’ll have to rely on the account manager to make the right choice. This type of account is recommended for investors with high capital and no time or interest to follow the market.

The Bottom Line

No matter what account type you choose, it is wise to take a test drive first. Most brokers offer demo accounts, which give investors an opportunity to use an account risk-free and try out different platforms and services.

As a basic rule of thumb, never put money into an account unless you are completely satisfied with the investment being made. With the different options available for forex trading accounts, the difference between being profitable and ending up in the red may be as simple as choosing the right type of account.

Can a Foreigner Open a U.S. Trading Account?

The U.S. stock market is the largest in the world, and a lot of investors would like to invest in it. One way to gain access to the U.S. stock markets is by owning a U.S. trading account, but is it possible for a foreigner to open a U.S. trading account?

Yes, a foreigner can open a U.S. trading account through a US-based online stock broker, but it would require additional documentation to comply with U.S. regulations. Some of the extra paperwork include proof of identity, tax documents, and sometimes, visa information.

Of course, there are several ways to invest in U.S. stocks. Read on to learn about them and the tax situation of a foreign trading account.

The advice in this article is not financial advice. Please consult with an expert before making any decisions related to taxation or opening an account.

The article contains affiliate links.

Investing in the U.S. stock market: what are your options?

If you are a non-US resident but want to trade in the U.S. stock market, there are basically two ways you can do that:

1. Opening a brokerage account with a local financial institution that has access to the U.S. stock markets

Some local financial institutions and big brokerage firms have access to the U.S. stock market either by partnering with U.S financial firms like Merrill Lynch or through global depository receipts. So, check with the financial institutions in your home country to know the ones that offer such services.

For example, if you are a U.K. citizen, you can open a brokerage account with Saxo Bank or Barclays to trade in the U.S. stock market. Similarly, if you’re in Malaysia, you can use CIMB Bank to invest in the U.S. stock market. There are brokerage firms or other financial institutions that offer similar services in every country; you just have to ask around.

2. Opening a Trading Account With a US-based Broker

Although some US-based brokers don’t allow foreign clients to open a trading account with them, a couple of them do offer online services to clients in specified countries.

Some of the US-based brokers that serve international clients online include Firstrade, MBTrading, Zecco, TradeStation, TD Ameritrade, Sogotrade, and Just2Trade. Each of them has a list of countries it accepts clients from, so before you choose any of them, find out if it supports your country of residence.

There some brokers with an international presence. That is, they have offices in different parts of the world, even though they’re headquartered in the US. The two brokers in this group are Charles Schwab and InteractiveBrokers. They have offices in the UK, some European countries, Hong Kong, Singapore, and Japan.

Can a Foreigner Open a U.S Trading Account

How to Open a Trading Account in the US

To open a U.S. trading account, you need to search for an online, US-based broker that accepts clients from your country of residence. When you have found the one you’re comfortable with, read their FAQ page to know all the documents you need to provide and the process involved. Alternatively, you can give them a call.

You will often be required to provide your international passport and current utility bill as proof of your identity and nonresident status, so make sure you have them.

Go to the broker’s website and click on the “open account” link to fill the necessary forms. Some of the forms may need to be signed, so you need to print them out. As a foreigner, you will be required to fill and sign the W-8BEN form. It is a very important form that indicates your foreign residence status, regarding taxations on income.

When you’re done with filling and signing the forms, scan them and email or upload them to the broker, along with a scanned copy of your passport and recent utility bill. Then, wait for the broker to review your application and send you an email indicating whether your application is successful or not.

If your application is accepted, you can proceed to deposit into your trading account. You must have already found out the methods of funds transfer supported by your broker: Wire Transfer, PayPal, ACH Transfer, etc. Use the option that suits you.

Once the deposited fund reflects in your trading account, you can start trading.

The Tax Situation for Foreign Trading Accounts

Normally all income from your investment in the U.S. market is subject to taxation. Below we lay out some of the necessary tax issues you need to know:

Please consult with a financial advisor before acting on any of the information below. The Robust Trader cannot completely guarantee that the information is up to date and correct.

Dividend Income Tax and Capital Gains

As a non-resident foreigner, any dividend you earn from investing in a U.S. security is subject to a 30% tax, which will be withheld by your broker at the time of payment. But the rate may be lower depending on your country of origin.

Some countries have tax treaties with the US, and if you’re a citizen of any of those countries, you may qualify for a lower tax rate. To get the exemption, you must have stated it in the IRS Form W-8BEN you submitted when you registered your trading account.

Form W-8BEN expires after three years from the day you signed it. Your broker will always notify you to renew it before it expires. If yours is expired, your account will be subject to the normal taxation for a foreigner even if you’re from a tax-exempt country.

Which Broker Should You Choose? – Our Pick

There are some brokers that allow foreigners to open accounts. After quite some research, we found that Firstrade had everything we were looking for!

They offer free stock, ETF, options, and mutual funds trading, which is a huge plus, since commission easily could eat into your profits if you’re not vigilant!

In addition, they offer quite a lot of tools, trading ideas, and good educational resources, ranging from videos to webinars!

Note: If you decide to sign up with the link above, we may get a small referral fee, at no cost to you! ��

Summary

You don’t need to be a U.S. citizen to trade in the U.S. stock market. You can open an online trading account with a U.S. broker, even as a foreigner, but more documentation is needed. Alternatively, you can make use of local financial institutions that have access to the U.S stock market. It is also important that you learn the relevant tax policies. Happy trading!

If you enjoyed this article you might also like our other articles answering common questions traders have!

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