Most common perception of currency trading - it is only suitable for very rich investors. This is wrong because the beauty of trading today is that all kind of traders can join in. Forex trading doesn’t have to be scary! When you aren’t ready to invest large sums into your trading account, you can take advantage of mini/micro accounts, where you can gain the needed experience in order to move on and trade larger sums of money.
What is a Forex Trading Account?
A forex account is a trading account that you will hold and that will work similarly to your bank account, but with the difference that it is primarily issued with the purpose of trading on currencies.
Forex accounts for example at XM Forex Broker can be opened in Micro, Standard or XM Zero formats. Other brokers, such as Octafx and Liteforex work with Classic, Standard and Advanced account types.
Micro accounts are the best solution for beginners, whether it is a high school math teacher, excitement-seeking BA graduate or stay-at-home mother who is seeking a way to stay home with her kids and still work. Hundred dollars will be enough to buy or sell currency pairs without risking it all.
While your trading knowledge is still limited, you can hardly expect to trade on the same level as the experienced trader. Micro accounts are therefore a great way to start forex trading with confidence.
Forex micro account is similar to the regular account, except that it requires smaller funding. In other words, with micro account you are trading cents instead of dollars. You can open an account with as little as $1 or $10.
Micro accounts can be considered as a transition phase. Once a new trader gets tired of practicing with demo account, he can switch to micro and continue to learn trading without considerable losses.
An example of Micro account can be viewed below:
- Base Currency Options USD, EUR, GBP, JPY, CHF, AUD, HUF, PLN, RUB, SGD, ZAR
- Contract Size 1 Lot = 1,000
- Leverage 1:1 to 1:888 ($5 – $20,000), 1:1 to 1:200 ($20,001 - $100,000), 1:1 to 1:100 ($100,001 +)
- Negative balance protection
- Spread on all majors As Low as 1 Pip
- Maximum open/pending orders per client 200 Positions
- Minimum trade volume 0.01 Lots (MT4), 0.1 Lots (MT5)
- Lot restriction per ticket 100 Lots
- Hedging allowed
- Islamic Account available
Another purpose of micro accounts is to give experienced traders a place to test their strategies. While trading forex, many times you have to adapt to certain changes and come up with new strategies. Applying new trading maneuvers on your standard account might not be such a good idea due to risks involved and that’s where micro account comes in handy.
You might argue that demo accounts can be used to test new strategies, but not all demo account offer the real-time trading environment. After all, it is a simulation. Micro account, on the other hand, not only minimizes the risks, but gives you a great opportunity to test your new strategy inside out before switching back to the regular account.
Because forex trading requires not only great skills but also discipline and emotion control, micro accounts have great advantage over demo accounts. While practicing your new ideas, the real money is traded, no matter how small. This gives you a chance to feel the certain degree of pain when a trade doesn’t go as planned. Losing $100 is not the same as losing $1,000; however it is much more painful than losing the virtual money, right?!
Another purpose of micro account is to take time off. There are times when a trader needs to cool off, regroup, rethink, and step back. Instead of getting yourself into overtrading loop in search of a chance to make that $500 you just lost back, it is more efficient to lower the amount being traded and slowly rebuild your self-esteem.
Micro account may limit the income, but it sure protects you from destructive losses, especially during very volatile periods, like during and shortly after important economic data releases. While minimizing the risks, micro account still gives you a sense of reality and a touch of profits!