How Micro Account Can Help Forex Beginners

What is a Micro Trading Account?

A micro account is an accessible starting point for aspiring Forex traders to dip their toes into the vast ocean of currency exchange without risking much capital upfront. Also referred to as a cent account, it enables conducting transactions in micro lots or units of 1,000 of the base currency. This fraction of the standard 100,000-unit lot provides the ideal playground for new traders to practice strategies and gain market experience while limiting overall risk exposure due to the small trade sizes.

Key Features of a Micro Trading Account:

• Lower Minimum Deposit: Brokers require much lower upfront capital to open a micro account than standard or ECN accounts. Many brokers offer micro accounts with deposits between $5 to $100. This makes it accessible to traders with limited starting capital

• Risk Management: Smaller contract sizes and position values in micro lots allow you to manage and limit risk effectively. You can implement wider stop losses without tying up too much capital

• Leverage Usage: Micro accounts provide the opportunity to utilize higher leverage ratios, which amplifies both profits and losses. However, due to the lower position sizes, the risk with leverage remains contained compared to a standard account

• Practice Arena: The micro account serves as a practice arena to experiment with different trading strategies and chart patterns without worrying about significant dollar losses associated with larger lot trades

• Psychology Training: Trading micro lots allows the trader to experience real market emotions, like fear and greed, on smaller positions. This provides a certain psychological training to prepare for standard lot trading

You can open a Forex trading account using platforms like RoboForex, Exness, InstaForex and many others.

Opening a micro account is usually a simple procedure inside your private cabinet

For example, the image shows the process of starting a small-scale Forex trading account:

• Account Type Selection: You can see two options, “Real” and “Demo.” The “Real” option is highlighted, meaning you'll set up a live account to trade with actual money if you proceed

• Trading Platform: The dropdown menu is set to “MetaTrader 4”, a popular platform traders use to buy and sell currencies in the Forex market

• Account Type Details: Within MetaTrader 4, you can choose different types of accounts. The one selected, “MT4 ProCent”, is designed for smaller balances and trades. It's like a mini-version of a regular trading account, perfect for beginners or those wanting to trade with smaller amounts

• Currency: This is set to “USD,” indicating that the account will use US dollars for transactions

• Leverage: The option shown, “1:1000”, represents how much more you can trade compared to what you have in your account. For example, if you have $1, the leverage allows you to trade as if you have $1000

• Password: This is where you would enter a password to secure your account

When you complete the process of creating a micro Forex account, the data for its access is usually sent to your e-mail specified during the registration process.

It is recommended that you save this information in a secure vault in case you have to transfer your account to another trading platform or simply forget your access password.

How Micro Accounts Work

Micro accounts function through trading contracts in micro lots, representing small position sizes in increments of 1,000 currency units. For example, a micro lot for EUR/USD equals 1,000 euros. This compares to the standard lot size of 100,000 units.

The smaller position sizes in micro accounts allow for exposure to the currency markets while placing a much smaller amount of capital at risk. For instance, trading a 1 micro lot position on EUR/USD with $1 per pip would risk $10 per pip movement. Contrast this to a 1 standard lot position, which would risk $100 per pip.

Micro accounts also utilize high leverage ratios, often starting from 1:500 up to 1:2000 in some cases. This further amplifies the gains and losses on a trade. You must exercise caution and proper risk management when using leverage with micro or other account types.

These factors of smaller contract size and high leverage make the micro account ideal for new traders to avoid large losses as they learn the ins and outs of Forex trading.

The value of a pip in a micro account depends on the currency pair traded and the exchange rate and lot size. Typically, with a micro lot of 1,000 units, a pip would be worth about $0.10 on most major pairs. Here are some examples:

• EUR/USD: 0.0001 x 1,000 = $0.10 per pip

• GBP/USD: 0.0001 x 1,000 = $0.10 per pip

• USD/JPY: 0.01 x 1,000 = $10 per pip

These values can fluctuate slightly based on the exchange rate. The amount per pip also increases as you trade larger lot sizes in a micro account. For instance, 5 micro-lots on EUR/USD would be 0.0001 x 5,000 units = $0.50 per pip.

Most brokers enable micro account holders to trade standard lot sizes if their account balance permits it. However, trading full standard lots defeats the micro account's risk protection purpose. It is best to use the lower micro lot sizes when starting.

Consider transitioning to a standard account once you generate consistent profits with micro lots. Even in a standard account, you can trade micro-lots to keep risk in check. The account type determines the minimum lot size, not the maximum.

Is it useful to trade Forex with a micro-account?

Here are some typical profiles of traders who tend to benefit the most from starting with a micro account:

• Complete beginners who want to get live market experience with minimal initial capital. The micro account allows this while limiting risk

• Traders focused on practice and education in real market conditions and were less concerned with high profitability initially

• Part-time traders who want to maintain their regular jobs while trying out trading with low risk

• Traders who want to test drive new strategies and technical indicators before applying them to larger positions

• Traders specifically use techniques like martingale that require many small incremental positions. For example, martingale strategies rely on doubling down with small positions to recoup losses. The micro lot sizes allow for implementing this high-risk approach more safely

Micro accounts cater well to traders' needs, prioritizing practice, education, and risk management over maximizing profits in the short term.

Best Forex Brokers For Beginners in 2024

1

9.4/10

Go to broker

eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. Don’t invest unless you’re prepared to lose all the money you invest.

Minimum deposit:

$50, $100 (for UK clients)

Bonus for deposit:

0%

Regulation:

CySEC, FCA, ASIC

Review

The eToro broker was founded in 2007. The company promotes itself as a social trading platform working with traders from over 140 countries. The broker has several divisions operating under different jurisdictions and licensed by different regulators. For example, eToro (Europe) is licensed by the Cypriot regulator CySEC (109/10) and eToro (UK) is licensed by the British regulator FCA (583263). The broker also has a representative office in Australia and the USA. eToro Profile Details

Pros/Cons

•the minimum transaction amount for copying is $1;

•handy functionality for passive investing;

•regulated by independent monitors;

•it is possible to purchase contracts for fractional shares (that is, to invest amounts less than the cost of one share);

•it is possible to buy shares at once (not CFDs) on the US stock exchanges.

•high spreads;

•periodic technical failures in order execution;

•lack of the most popular platforms such as MetaTrader 4 and MetaTrader 5 in Europe and the CIS;

•no access to ECN systems, orders are processed only according to the STP (straight-through processing) scheme with access to specific liquidity providers;

•there is a commission for withdrawing funds;

•impolite support staff;

•inconvenient website.

Study Review

2

9.2/10

Go to broker

Your capital is at risk.

Minimum deposit:

No minimum

Bonus for deposit:

0%

Regulation:

FSC (BVI), ASIC, IIROC, FCA, CFTC, NFA

Review

The name OANDA is an acronym for “Olsen & Associates” or “Olsen AND Associates”. It is registered in the United States and provides its clients with a wide range of financial services in most countries of the world. The company was founded in 1996 and is currently regulated in four jurisdictions. The main regulator of the broker is the UK Financial Conduct Authority (FCA). Oanda Canada is licensed by IIROC. The company has several significant awards to its credit, including a victory in the category "Best Forex Trading Technologies" from the UK Forex Awards, "Best Trading Platform" from FX Week, as well as "Best Customer Service" from the US Foreign Exchange Report.

Pros/Cons

•Minimum deposit from 1 dollar.

•A large selection of the most popular trading instruments.

•Several reliable and reputable financial regulators.

•Inconvenient and poorly functioning site.

•Lack of cent accounts.

•Lack of bonus programs.

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Comparing Forex Account Types

The following tables are provided for comparative purposes only and may not reflect the actual values or conditions offered by any specific broker. It is intended to help the reader understand the differences between a micro Forex account and other common types of accounts through comparison. Always verify the specifics with your chosen broker before making any trading decisions.

How to open a micro Forex trading account?

The following table summarizes the best brokers that offer micro account service.

Here is the step-by-step process to open a Forex micro trading account:

• Research brokers that offer micro accounts: Compare minimum deposits, commissions, leverage, and spreads across brokers

• Complete account applicatio: Fill in the new form with your details and submit verification documents like ID and address proof. Regulators require this for KYC and anti-money laundering laws

• Fund your account: Deposit the minimum capital through online transfer or other methods to activate your account. Some brokers may offer free signup bonuses

• Download trading platform: Gain access to the broker's proprietary platform or supported third-party platform like MetaTrader 4 or cTrader. Install the platform on your desktop or mobile device

• Practice with demo: Use the demo account mode on the platform to test out making trades and orders. Paper trade until you become comfortable

• Go live: When ready, switch the account mode to live trading and start trading micro lots to gain real market experience