In General, the word micro means something small and limited in size compared to other objects of its class. In Forex there are available micro and mini accounts for smaller size trades. So it turns out that the micro forex account was made only for those who cannot afford to open a normal account? Is it safer to trade on a Forex micro account than on an ordinary account? In this article we will try to answer these and some other questions that concern the micro forex account.
Virtually all brokers provide several types of accounts for trading in the Forex market. Today we will talk about micro accounts, however in our opinion they do not deserve attention at all. But, let’s first understand what a micro, mini and ordinary account is, so that there is no confusion in these concepts.
Micro forex account explained
The main difference is in cost per point, 1 pip on a standard account will cost $ 10, in a mini account, 1 pip is $ 1, and for micro 1 pip will be 10 cents. You will need the appropriate amount to trade on these accounts, each broker has its own requirements, but generally a standard account can be opened with $ 2000, a mini-$ 50, and the micro can be opened even if you have only $ 1.
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So, as you understand to open a mini or micro forex account, you will need a very small amount of money compared to a regular account. Therefore, it is believed that micro and mini accounts are the link between Forex traders who have already received practice on a demo account, but are not yet ready to open a standard real account, and the real world of Forex.
Should you open a micro forex account?
Despite the fact that the mini/micro forex account does not require significant investment, you can still manage a fairly large amount of capital. This will be the result of margin, and marginal requirements in the Forex market are 1%. It sounds good, but you still need to be aware of the risks, so as not to lose even that amount of money.
You may think that since you invest a small amount, you do not have to worry, but this way of thinking is best to be avoided. You should understand well what leverage and marginal trading are, and what requirements your broker has. Requirements must be on the site, if they do not appear there it is better to check through the support desk.
Margin is important
Margin allows you to manage funds that can several times exceed the amount that you have on your account. As we said before, usually marginal requirements are 1%, but they can be less or more. The problem with the margin is that your position can be forcibly closed if you exceed the margin limit. It is called the stop out, when the broker forcibly closes the position, so as not to lose more money than you have on the account.
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If the margin requirement is 200: 1, it means that your broker will “freeze” half the value of the position, for each currency pair that you are trading. That’s why always check the size of the position, this will allow you not to be caught off guard.
Micro and mini Forex accounts are popular, because they are an excellent alternative to trading stocks and futures.
However, this does not mean that this types of trades are safe. Having at your disposal only $ 200, you can earn several thousand. However, do not think that the Micro and Mini Forex accounts are only for the poor. They might be a good option for traders depending on their trading strategy.
By opening a mini or micro account, you can get a good practice, but never forget about the risks involved.