The world of free trading has become widespread, with companies claiming they have zero commission, and in some case, even free trading accounts. Of course, nothing in life is free, so money is recouped on the spreads and certain trading limits are placed on your account.
This means that brokers are increasingly reliant on higher transaction volumes in order to survive. This may seem like pointless knowledge as a customer, but it tells us one thing: they’re incentivizing bigger deposits and higher trade volumes.
In return for depositing more money, many brokers will attribute you a VIP trading account. Here are some benefits of being a VIP member at a broker.
Benefits of being a VIP member
Fees
Whilst some brokers offer zero commission on some trades (perhaps ETFs and stocks), rarely are all products in all markets free of commission. Having a VIP membership is a possible way to reduce these trading fees on commodities, crypto, and other assets.
Furthermore, account fees, withdrawal fees, and inactivity fees may be reduced (or removed altogether) with a VIP account. Although, this will very much depend on the broker you use.
Client Support
One of the most important aspects of a broker is how well they treat their customers. It’s possible you will have a lot of money tied up in there (particularly the VIP members), and panic can set in when things go wrong, be it delays or glitches.
VIP trading members are often prioritized when it comes to customer support, putting them at the front of the queue with their own bespoke solutions. In fact, there may even be support dedicated to your own trading style, from hedging to scaling.
Market Insights and Educational Material
Paying money for good intel is common because it can pay for itself in the long run in mistakes avoided and tips capitalized on. However, advanced market insights can be free for VIP members of some trading accounts.
Furthermore, more educational material can often be accessed for VIP members, which can be highly valuable. It’s not just generic trading education either, but often bespoke to the software/platform you’re using to help contextualize trading and provide actionable insights.
Activating VIP memberships – how big of a deposit?
A large minimum deposit is often required to become a VIP member at most brokers. It’s common to see figures in the range of $10,000 to $25,000, and execution of the account status is often instant.
So, what’s a professional account?
A professional trading account may sound like a similar incentive scheme as the VIP membership, but there are some differences in the benefits. Most notable, the professional accounts center more around granting higher leveraging and negative balance protection. This is perfect for CFD traders and those looking for leverage to maximize their trading profits.
Increasing leverage
Although it depends on your region, leverage is often in the range of 1:30 for retail clients (for example, eToro). Yet, with a professional account, this leverage is increased to 1:200 and above (1:400 in the example of eToro).
This provides the opportunity for much greater exposure in the market with a smaller deposit. In fact, the deposits required are even lower than with VIP members, though other criteria are often required (see below).
This could be useful for forex traders who operate on small price changes, in which leverage can supercharge their potential for profits of a given trade – of course, increasing the risk too.
Other benefits of being a professional trader
Negative balance protection is also provided at various brokers, meaning that traders cannot lose more than their total deposit.
In general, it’s usually easy to reverse the account status back to being a retail trader if you no longer want the classification of being a professional trader.
Criteria of being a professional trader
There’s a range of criteria for being classified as a professional trader and thus being able to access vastly more leverage. Sufficient trading activity in the past year will likely be required, of which evidence needs to be provided (i.e. 10+ transactions per quarter). You will need a financial instrument portfolio of over EUR 500,000, which includes financial instruments and cash deposits (bonds, shares, derivatives). Finally, you must have worked in the financial sector for at least one year in a professional position that’s somewhat relevant to the transactions you’ll be undertaking.
So, VIP or Professional Account?
First and foremost, it’s possible to request VIP membership status if you’re granted a professional account. But, if you’re looking to decide between which one is more relevant to you, it comes down to whether you’re simply looking to make larger volume trades or leveraged trading.
The fee-saving benefits of a VIP membership can be very lucrative, meaning that you only really need to consider a professional account if you’re finding the current leverage possibilities too restrictive.
