Forex account
Family I · Instruments
Not to be confused with demo account, cfd account, standard account.
Forex account is the record a broker keeps for a client who trades spot currency pairs. It holds the client's cash balance, the open positions in currencies, and the margin reserved against those positions. Trading terms such as leverage, minimum deposit and permitted order types are set by the broker and vary by jurisdiction.
What the account records
A forex account is a bookkeeping structure, not a currency wallet in the everyday sense. Its balance is normally denominated in one base currency chosen by the client, and every profit, loss, swap and commission is converted into that base currency.
- Cash balance — funds deposited plus realised profit or loss.
- Open positions — long or short amounts in each currency pair.
- Margin — the portion of equity the broker sets aside as collateral.
- Equity — cash balance plus or minus unrealised profit or loss.
Because spot forex is traded on margin, the account can hold positions far larger than its cash. The broker's margin rules, not the account itself, determine how large.
Worked example
A client deposits 10,000 USD and buys 100,000 EUR/USD at 1.1000 with 2% margin.
The position remains open; the 500 USD loss is unrealised and reduces equity, not the cash balance, until the trade is closed.
Terms that vary
Leverage caps, margin close-out levels, negative-balance protection, permitted hedging and the availability of micro lots are set by the broker and the regulator in the client's country. A retail account in one jurisdiction may face a leverage limit several times lower than an account with the same broker elsewhere. Account opening requirements, including identity documents, also differ by country.
Often confused with
- demo account
- A demo account uses simulated funds and no real money changes hands, whereas a forex account holds client cash and settles real trades; the visible sign is whether withdrawals are possible.
- cfd account
- A CFD account trades contracts for difference on many underlying assets, while a forex account is used for spot currency pairs; the visible sign is whether the instrument list extends beyond currency pairs to shares, indices and commodities.
- standard account
- A standard account is one particular contract size and pricing tier, usually 1 lot = 100,000 units with spreads rather than commission, whereas a forex account is the general ledger that any such tier sits inside; the visible sign is the account type label in the broker's fee schedule.