The standard trading account is the most common account. Its name derives from the fact that you have access to standard lots of currency, each of which is worth $100,000. This doesn't 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. This type of account is recommended for experienced, well-funded traders.
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 being 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.
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 his account.
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 being 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.
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 his account.
Source: http://investopedia.com/articles/forex/08/forex-account-type.asp
Tags: forex trading accounts
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