Why Open a Micro Forex Broker Account First
These days, perhaps the easiest way to open a forex trading account is via an online forex broker. Such forex brokers will often allow clients to open micro or mini accounts for customers with initial deposits that can go as low as $25.
Nevertheless, most reputable online forex brokers require that initial account deposits be more in the $100-$500 range for their micro accounts. This greater amount can provide some additional execution capability in case a trader’s first few deals are not very successful.
A Great Way to Try Out a Forex Broker
Perhaps one of the best ways to test the services of a forex broker, when it comes to managing your money and executing real forex deals and orders, is to open a micro account. Demo accounts can also be helpful in this regard, especially if you are suspicious about a particular broker that does not offer micro accounts.
For example, test out their proprietary information, analytics, deal execution, spreads, rollovers, trading platform, customer service, account management, deposit and withdrawal facilities, etc. See if everything seems legitimate, works as promised and meets your standards.
Trading Genuine Money is Far More Realistic
Not only can a trader open a micro account to try out a new forex broker, but they can also practice trading in a far more realistic environment than they can in a demo or practice trading account.
Basically, since micro account trading involves placing real money at risk, albeit in rather small amounts with minimums being on the order of 1/10 of that put at risk in standard retail forex trading amounts. Nevertheless, by taking real risks, this often induces some of the important emotional reactions involving how people feel and act when making and losing sums of their own money.
New forex traders need to master these reactions and incorporate that information in their trading plans to minimize any negative impact. Accordingly, using a micro account means that these emotional responses and their impact can be observed and corrected for before placing larger amounts at risk.
The Benefits of Trading Smaller Lot Sizes
Often, traders who open micro accounts with a forex broker will be permitted to trade in smaller lot sizes on the order of $10,000 per lot. This can allow them to fine tune their position sizing considerably when it comes to money management. It can also permit traders to take lower risks per trade that can be especially advantageous during very volatile periods, like during and shortly after important economic data releases.
Usually traders can choose to upgrade their forex brokerage account to a standard or V.I.P. trading account by depositing additional funds. Nevertheless, this often means they will then need to trade in normal lot sizes which tend to be more in the $100,000 per lot range and so might end up losing the benefits of trading in these smaller lot sizes.
