I�ve been trading in my demo account for a while and I think I�m ready for a live account. I have heard a lot about micro lots and regular accounts. I don�t really see the difference between these two. I mean, if I don�t like taking risks I would choose a micro account isn�t it? But I am sure about my trading style I can use my margin to control more money. But, am I missing something? Can you help me with this dilemma? Should I open a micro account or a regular account?
Thanks
Micro accounts are hardly recommended because you take the risk of losing in a shorter period without having the opportunity of recovery. However, if you have found a profitable system or strategy and your Risk Management plan has been successful, maybe the idea of a micro account is not so crazy for you. I would anyway recommend a regular account. If you�re looking for brokers make sure you research well before you invest, for them to be regulated is a must.
I would go with the regular account, even though you have a good profitable trading system, there is always going to exist the chance that you might have a bad day. Having a normal account big a standard amount of money helps you a lot, plus who knows maybe when you open you micro account is one of those bad days and you lose all and then you’ll have to re-open another one again. You might think I’m being a bit tragic here, but if I were you, I would go with the standard account type.
Let’s be realistic and say that it’s more common to find newbies interested on trading Forex that only get to trade with a small budget hoping that their incomes improve as far as they become better traders every day. So I guess like me there are thousands of traders investing on micro accounts and dealing with losses on short periods of time.
Also T-rex there are a lot of micro accounts thanks to the risk, no one wants to risk more than enough, but the bed part is this people want to be rich in one second, so its impossible, they have to risk more.
I’d like to point out, that it doesn’t matter that much whether you open a micro, mini or standard account type.
What does matter is your starting deposit together with if your broker allows fractional lot sizes. Fractional lot sizes allows you to perform proper risk- and money management even if your starting account size is small.
Think about it - if you wish to risk no more than 4% of your capital in any one trade, it becomes clear that for smaller accounts it’s a must to be able to trade only fractions of a lot. Of course this means your account will grow slowly, but patience is a virtue and at least your account will be growing instead of blowing up.
But like Babypips school says - take care not to be undercapitalized! This is likely one of THE MAJOR reasons why newbies like me, and perhaps also you, fail in our endeavors.
So, to summarize, I’d make sure to find a regulated broker that allows fractional lot sizes, and start a micro account with them. However, I’d start with an absolute minimum of 1000USD even if the min deposit is less.
Hope this helps
just keep in mind some differences about capitalizing an account. If you�ll open a mini account, you need at least $10.000 and $1000 for a micro account. Before taking this decision, make sure you understand concepts as margin and leverage and their relation because it affects your manage skills in this market. Adelin
Remember the lot is the measure of the transaction so if your plan is very specific you can try with the big ones could be a waste of money and time if you don�t have it
I’ve ruined several accounts placing high trades but I learned
Hey Milli would you mind explaining to me what does a lot have to do with big accounts? Haven’t figured out your point yet.
If you have any confusion with the concept of lot you can go here
Know Your P’s and L’s | Pre-School: Forex Basics | Learn Forex Trading
Read carefully because it�s always puzzling the terms
[B]The Long Answer[/B]
To anyone else coming across this post … all you need to do is click on the link that Magg Beauty has given. Then read this one:
Impress Your Date with Your Forex Lingo | Pre-School: Forex Basics | Learn Forex Trading
Then this one:
Protect Yo Self Before You Wreck Yo Self | Pre-School: Forex Basics | Learn Forex Trading
Then the entire section on Money Management:
Money Management | 13th Grade: Money Management | Learn Forex Trading
Basically, it shouldn’t matter whether you open a standard or micro account.
What matters is that you have a solid money management plan in place and that you excecute without variation everytime. (unless you have a really really really sure thing). Oh yeah, there’s no such thing as a sure thing. Gamblers betting on Tyson to take Holyfield in '96 found that out first hand.
[B]The Short Answer[/B]
If you’re account size about 50k or above get a standard account.
Note: most people who have 50k of disposable income don’t frequent this site
If you’re account size is somewhere around 50k and below (most people) get a mini account with a broker that allows fractional pips, etc. This guarantees that you have the ability to take proper money management in your own hands.
Hope this helps.
Good Luck.
I think this post belongs in the Newbies section.
Newcomers should really understand just how essential money management and risk management are in trading.
This makes no sense! Your risk should not be based on what type of account you have, it should be based on what percent of your total account your willing to lose on a trade!
Thinking with the mindset of recovering losses is dangerous in my humble opinion. Thinking about previous losses and trying to get your money back on the following trades will screw with your mindset and cause you to do things you should not do.
Don’t be fooled, the hardest part of forex is not the finding of a good system, the hardest part is controlling your emotions when your money is on the line (real money, no demo money). Money management and your ability to control your emotions and stick to your MM plan is the Holy Grail.
If you only have a small amount, open a micro account, and practice controlling your emotions. Demo are good for one thing only, learning a platform.
Some of you guys are not catching on to the money management aspect, a re-read through that part of baby pips school would serve you well.
Exactly, It doesn’t have anything to do with the type of your account. Is all about risk management and what percentage you risk from your total equity, regardless the account. I guess along with controlling your emotions, discipline is the most important part to become a successful trader.
Trading in forex market is all about money game. Forex market does not mean what money you have invested and what trading you are doing. It is all about money management. How expert are you in managing your money this is the main thing in forex market. Trading with knowledge and patience can help you to win this market.
Well I guess everything is related. There is a goal for every trader to gain pips, and money management is as important as risk management. Also investments are important as a big something that makes Forex.
it is true what you guys are talking about but the thread is mainly about micro and mini accounts. Let�s discuss more about it, actually it�d be helpful for traders as me. If you have particular experiences, thanks for sharing. Adelin
Hello,
Please don’t take this as an insult, but as a newbie, I have not seen an answer to the original question that would be suitable for a newbie to understand (a plain-English answer to the question). The way I see it, a micro or mini account is ideal for a trader with little starting capital, to get in the game for real, and practice strategies and money management in a way that is realistic for their situation. Most brokers open demo accounts with $50K or more, and lot sizes of $100K. I opened a demo account with these parameters, with leverage of 100:1. This was not realistic for my situation. Since I knew I would not be actually trading live with $50K, I called the broker and asked them to change my starting balance to $250, and change my leverage to 200:1. Those were the parameters of the broker I intended to go live with. They were happy to do it. I traded a few DAYS using the demo account, but I felt I needed to put real money on the line to accurately test all aspects of trading (including the emotional aspect). That was the only way I felt I could be totally realistic. So I opened a live mini account, with $250. I made my first trade on December 10. As of 4pm January 2, my account balance is $807. I have records of all of my trades. I’ve done well so far, but I am still very cautiously optimistic. Still learning, and still have a LONG way to go. I opened a micro account with a broker who offered to fund it with $50 to get me to open the account. I use that account to test my stop limits, and to let my profits run longer than I would with my mini account.
Now, for my newbie answer to the question. Micro, mini, and standard accounts allow you to trade in lot sizes that allow your risk to be proportional to your account balance. So far, I only trade the EUR/USD pair, so I am using numbers/amounts for that pair. I have $50 in my micro account. 1 lot is $1000, and a pip is worth .10 there. So if I lose (or gain) 10 pips in my micro account, my dollar loss (or gain) is $1.00 (plus the spread, of course). I opened my mini account with $250. 1 lot in the mini account is $10,000, and a pip is worth $1.00. So if I lose (or gain) 10 pips in my mini account, my dollar loss (or gain) is $10.00. A standard account (which I have not opened, but plan to when I have $10,000 to open the account with) would trade lots of $100,000. A pip would be worth $10.00. So if I lose (or gain) 10 pips in a standard account, my dollar loss (or gain) would be $100.
So in a real-world example, if you had $500 and opened a standard account (assuming a broker would allow that), and traded 1 lot of $100,000, if a pip is worth $10 in that case, it would only take 50 pips to wipe your account out. But if you opened a mini account with the same $500 and traded a $1000 lot, you would have 500 pips to work with, since a pip would be worth $1. Smaller risk, smaller reward. The way I’m using my mini account, I’m trading in single lots of $10,000. If my balance ever gets to $2500, I’ll begin to trade in lots of 10, which would equal $100,000. I’m sticking to a rule of 1 lot of $10,000 for every $250 I have in my account, although my broker only requires $50 to open 1 lot. I may or may not use all available lots on every trade. But that’s my rule for now.
Leverage is another consideration. Regardless of your balance, you must always make sure you do not use more leverage than you can handle.
I hope that as a newbie, I answered the question in terms that a fellow newbie can understand. I only hope I didn’t confuse anyone with my point of view!
Ok, what I can see here, is micro or regular account depends of everyone, so if I don�t know what to choos, maybe I have to try them both, anyway, thanks.
There is absolutely no good reason for someone who has never traded live before to open a full size account with Forex. Start micro and work your way up.
It used to be that micro accounts that allow you to fractionalize lots and trade as small as .01 cent per pip didn’t exsist. So, IT USED TO BE true that if you opened an account with a very small amount you were already done because you could only trade lots too big for your account, which would cause a margin call very quickly.
Such is not the case anymore. With the ability to trade down to .01 cent you can start an account with a very small amount and control risk and money management very easily.
Trading live is sometimes nothing like demo and sometimes very much like it. Which is to say it is the same animal with different stripes and similar but different behaviors.
Most, probably all, new live trades blow their first accounts or at least lose most of it before they learn to be consistently profitable.
I started a micro account with IBFX over a month ago with 100 dollars. Started out good. Up +25 bucks first two days. Dumb luck. Took it all the way down to 30 bucks by making noob mistakes everyone makes and being a victim of the psychology that happens only on a live account. Now, I’ve learned a thing or five and my account is up to 200 bucks and I’m being consistent and avoiding noob mistakes.
This is all great and I’m learned and getting some real trading experience, not demo. But, I would probably be severely pissed if I jumped in full bore and put in 50k or even 100K and lost that much of my account initially.
Point is a large starting account does not guarantee that you will not lose any less quickly. Yes, you will make more money on a larger account. But, if you are new it’s more probably you will lose your account. I recommend dipping your toes in the waters first with a micro account, instead of jumping in headfirst only to find out the water is shallow and you break your kneck or there are sharks.
Beyond knowing that you have a good trading plan and can consistent with it another reason to try a micro account, is to guage the broker of your choice, the platform and connectivity. I’d hate to start a 50k account only to find the broker is a total crook and I get disconnected all the time.