How to Chose the Best Account Type

Prior to sending your money to your broker, you should be aware of the different bells and whistles available to new clients

How to Chose the Best Account Type

Prior to sending your money to your broker, you should be aware of the different bells and whistles available to new clients. If you are new to trading, you want to practice before you begin. Most brokers will have an education section that describes the different types of accounts they offer as well as different ways to trade. Some brokers offer one on one trading tutorials while others provide videos and webinars. Make sure you test drive a broker’s platform before you decide on the type of account you would like to fund.

Test Drive Your Brokers Platform

One of the most important aspects of trading is practice. It sounds prudent but you would be surprised that most people like to dive right in and don’t spend time practicing their investing approach. There are three ways that you can practice. The first is to paper trade. This means that you come up with a trading idea, you write down where you will enter and exit, and follow the markets. The second is to open an account and fund it and take very small positions to make sure that you don’t lose any significant money as you practice your trading. The last method is to use a demonstration account.

What is a Demo Account?

A trading demo account is an account that is funded by your broker with demo money. This is fake money that has no value except it can help you keep score. The benefit of using a demonstration account is you can test out several different strategies using real-time data. You can test to see how the execution of trading will work as well as how you will manage your positions.

Most brokers provide a demo account that lasts for a specific period, while some offer them forever. You generally will also have access to an infinite amount of demonstration money. The beauty of a demo account is that you can test several different trading strategies. If you want to see if a scaling strategy will work, using real-time data a demo account is perfect. Many times if you are paper trading, you will not be sure if you will be able to transact. By using a demonstration account you will be able to ensure that you can make a trade.

What is the Best Account Type?

There are different types of trading accounts available depending on the broker you chose. Most brokers provide better spread and more bells and whistle if you deposit more money. This can make a difference especially if you are trying to scalp the market and every pip counts.  If you don’t need to capture every pip then a standard account or micro account will do just fine. What’s most important is that you are able to test drive your broker’s platform with a demo account before you risk your own capital.

Updated Date: 07 March 2019, 09:56

John Thunberbold

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