Stock Accounts
Indices Accounts Examples
In the recent years retail trading has grown hugely in popularity and demand for different types of trading accounts has grown. There are many different trading account types available to any trader who wants to invest in the online market - Account Explanation.
The market is a highly leveraged market for speculating on price valuations. Traders can purchase large amounts of trading units using leverage - Leverage is what makes indices trading attractive to many online traders - with trading leverage a trader can make more profits or losses because they use less of their capital & borrow the rest.
There are different types of trading accounts available to help investors better manage their trading account capital as well as their trades.
How a Real Account Looks Like
It is therefore important that the traders consider what they want to get out of their trading, prior to deciding on the account type to open.
Shown Below is a comparison of the two types of trading accounts commonly used to trade indices. The trading account types review below explains the different features of each of the types of trading accounts.
1. Standard Accounts Explained
Indices Account Explanation - Standard Stock Account. A Standard Account is denominated in US Dollars and trade transactions are placed using standard lots. One lot is also known as one contract. Min opening capital - at least least $10,000 US Dollars.
1 contract refers to the minimum size of a single trade. This trading account option is the most suitable for traders with enough capital to invest in stock indices trading - this trading account option requires $10,000 & $50,000 dollars as starting capital, for this standard account the trader won't be undercapitalized & with good indices money management rules and indices money management methods, this standard account option has the best chance for profitability because it is not undercapitalized. Under capitalization is what makes most traders in indices trading not profitable.
It isn't recommended to open a standard account unless you have an account balance of at between $10,000 minimum and $50,000.
Professional Money Managers recommend $50,000 minimum to open this standard account & only opening trades with only 2% of the trading capital you have in your trading account. However, most online brokers will still open this standard account for you if you have more than $10,000.
With trading leverage of 100:1, you will borrow from your broker (with leverage ratio of 100:1, your broker gives you $100 dollars for every $1 dollar that you have in your trading account, therefore if you have $1,000, the broker will give you $100 of leverage for each $1 dollar you have, meaning after leverage you will have $1,000*100=$100,000 which you can then use to trade indices).
2. Micro Account Described
Indices Account Explanation - Micro Account. Micro Accounts use lot sizes of only equivalent one-hundredth that of a trading standard lot. These Micro trading accounts are often appropriate for traders without a lot of indices capital & can sometimes be opened with only a $5 minimum balance.
This Micro trading account option allows the trader to place trades in micro lots. 1 indices trading micro lot is one-tenth of a trading mini lot and one-hundredth of a trading standard lot.
This Micro trading account option is generally best suited for account equity balances that are between $1,000 and $5,000
In trading, one indices trading standard lot is the standard transaction minimum of instrument traded in the trading market. But many brokers offer fractions of this trading standard lot to enable more retail stock traders to access the trading market. Being able to offer indices trading micro lots reduces the minimum trade transaction size thus giving the beginners and also those traders without a lot of indices capital to begin trading and get a feel of the trading market without investing a lot of trading capital.
There are learn trading online tutorials that a trader can read even before opening a real account, and to get extra practice in indices before opening a real account a beginner trader should open a practice Indices demo trading practice account with a broker - so as to practice placing trade transactions before opening a real account & investing with real cash.
During the trading training period using the trading practice account, the beginner trader will learn the key factors needed to succeed in indices trading such as: indices trading education, indices money management, indices plan & systems.
The types of trading strategies used and the skills required for any of these 2 accounts are essentially the same - those trading skills and strategies required for the Standard account or Micro trading account are the same the only difference to be adjusted are the indices money management rules for each account type.
