Micro Accounts 101

A micro account is ideal for beginners and clients whose strategy requires the smallest trade sizes. These accounts are great for those who are looking to get into the forex market but are not looking to invest a lot of money. With micro trading accounts, you can get started with as little as $50. However, the minimum trades are usually lots of 1,000 or 10,000 units, depending on if it is a mini or micro account. Micro accounts trade in smaller units, so often they are the easiest to get into immediately. Also, the forex mini accounts deal in small amounts, which usually start at 10,000 units.

Micro accounts are types of conventional self-trading account. Trading brokers often offer these accounts as a way to encourage traders to try Forex trading and to do so with relatively low risk. With a micro account, traders can trade in micro-lots of $1,000. This further reduces the levels of capital that are required to fund and begin trading.

Forex trading with micro accounts

The demand for micro trading accounts when it comes to trading forex is particularly high with new traders. By trading forex for a micro account, it is possible for traders to begin trading with a smaller capital and with higher leverage, all depending on the broker. Also, traders use micro accounts for trying out new brokers with a live account while minimising the risks.

When using micro accounts, traders can open trades with contract sizes that start from 1,000 lots instead of the larger 100,000 standard lot. This allows the traders to refine their trading strategy with smaller deposits before they move to larger account sizes.

Minimum deposit for micro accounts

Micro accounts give forex traders the option to trade in a lot smaller increments than with a standard account. A micro lot is equivalent to 1,000 units of the base currency. This is in comparison to the 100,000 units of a standard lot. A one-pip change in a currency pair that is traded in a micro account equates to a $0.10 change for EUR/USD. Micro accounts are designed for new traders, who looking to trade with having made less of an investment, or who just want to put a small amount of money on the line. As traders gain more confidence in their trading, more lots can get added to increase the exposure. Many of the trading brokers allow traders to open micro trading accounts with as little as $50.

Advantages of micro accounts

The most apparent advantage to a micro trading account is that you can get into the market more easily and to trade without having to risk large sums of money. For those who are just learning the ropes of the trading industry or don’t want to invest large sums into any one account, micro accounts could be best. Micro trading accounts have low minimums, which is especially useful for beginners for are looking to practice and gain experience.

Micro accounts can also be helpful even if you have enough trading capital available for a standard account. Having the option to open a micro account for a Forex broker could be useful if you want to test out its execution, deposit and withdrawal speeds, live accounts support without risking too much of your capital. The forex brokers who offer micro trading accounts with less expense and less risk, they have the means to protect themselves from the risks. Therefore, they can provide acceptable spreads and rates. Traders can open micro accounts to test out new forex brokers. Also, traders can use the micro trading account to practice trading in a realistic environment than they would get from a demo or practice trading account.

Disadvantages of micro accounts

As it is with any investment, there’s always a risk, which is probably the most significant disadvantage to micro accounts. While you may only be investing a small amount of money, it also means that you perhaps won’t be making big profits either. Therefore, depending on your reason for opening a micro trading account, these disadvantages may be acceptable. Another disadvantage is that the brokers generally pay a specific rate if your position stays open apart outside of the opening times of the market. This directly impacts your profits, and therefore affecting your performance. To avoid this, you can choose to trade just during the opening times, or you can compare the fees applied to all the platforms before you make your choice of broker.

Take note that some of the brokers offer micro accounts as “self-service” accounts. This means that there is no chat or telephone support provided. All the support is done through FAQs, email, and an online trading community.

How to Find the Best Micro Accounts Online

With such a high level of market competition and massive volume of exchanges and brokers, it may be difficult for beginners to decide which to choose. Before picking the right online trading platform for micro accounts, keep these things in mind:

Regulation

Ensure that the Broker or Exchange you use is regulated by an organisation such as the Financial Conduct Authority in the UK (also known as the FCA). These types of authorities and regulatory bodies develop rules and services that protect the integrity of the market and safety of traders and investors. Due to safety concerns, make sure to open your micro trading account with a regulated broker.

Customer Service

Trading happens online 24 hours a day, which means that customer support needs to be available at all times. Primarily, you will want to speak to a live support person. Many brokerages have a local UK office. When checking out support, ask pertinent questions to find out if the representative is reliable or not.

Also, the details of a trustworthy broker should be out in the open, either online or otherwise, for the public to see.

Account Types

Your ideal online micro trading account for buying or trading stocks and shares should offer either multiple account options or an element of customizability with your account. The broker may even have a separate account for beginning traders. Look for a micro trading account that provides competitive spreads and easy deposits and withdrawals.

Tradeable Assets

Many people concentrate on just one asset class when selecting a micro account. However, keep in mind there are many other types of investment alternatives to invest in. These include stocks, shares, Forex, ETFs, CFDs, Cryptocurrencies, and more.

Mobile Trading

When looking at brokers with micro accounts, look to see if they have a mobile trading app. These apps are useful for traders who do most of the trading while they are on-the-go or just away from their computer. Not all brokers offer mobile trading apps with the same features, so look at the different features offered.

Fees

Online trading costs money. Brokers usually charge a percentage, but you may choose to find a broker who charges a flat fee instead, as opposed to a percentage model.

Liquidity

Because stocks and shares are traded in a market where people are always looking to both buy and sell, make sure you consider the amount of liquidity an exchange has. Liquidity is the ability to sell an asset or currency without wrecking the price.

For more information on CFD and Forex trading please see our tutorials.