How Forex Micro Accounts Work

How Forex Micro Accounts Work

Submitted by adil on Sat, 11/15/2014 - 07:25

Forex trading is a very risky business. Most of the traders jump into forex trading without having an in-depth knowledge about their future strategies and how they plan to go about investing money.

The Challenge
The most basic problem faced by traders is that they do not have the initial amount of cash and for that matter they come up with various methods and ways to make money with the limited amount they have. The forex brokers have devised many ways to make the trading market more accessible for average trader. The initial assistance that was provided to new traders is to trade on margins. The second assistance which was provided by the forex brokers was that, they lowered the bar through which brokers could enter into the trading market by creating a Forex mini account. This gave traders the facility to trade of with 10k.This was a huge advantage as, by trading on margin traders needed a minimum amount of 100k. By creating a Forex mini account, a large number of new traders jumped into the market.

Requirement for Micro Accounts
As described this type of forex account is ideal for new comers and beginners, due to the minimum amount of cash inflow. This account can also serve to be very useful for traders who have gained a lot of experience and want to invest into something new. This can serve to be ideal for someone who is looking to earn money from investing into a new strategy. The low entry bar for micro accounts gives an edge over the other traders, as this helps them to make use of less leverage and the ability to diversify more.

Difference from Demo Accounts
Some traders recommend that creating demo account is a better strategy than micro accounts. But as demo accounts are not made for dealing with real or actual currency, a trader who is new in the market cannot experience the actual trading risks while trading with a demo account. The most experiences and successful foreign exchange traders are of the view that using Forex micro accounts is the best strategy for earning profits with minimizing the risk to lose money.

How to use the Forex Micro Account
You should always be very careful with your trading in the beginning. After you have acquired some experience, always stick to a single trade at a time. There is a likely chance that you may fall prey to losses if you poke your nose everywhere. Always look for better opportunities, but only if you think it can be afforded by you. Another thing to be kept in mind is to set stops, as you need to do evaluation of your trading potential. Always take assistance from a Forex journal and never hesitate to consult from experience traders. Make sure to understand the Micro forex account before actually starting the trading. You should be able to develop an understanding about the graphs and charts in the actual trading scenario. The ability to comprehend and analyze the trading charts and graphs is one of the key to success in the Forex trading business.