Micro Accounts: Making the Transition from Demo to Real Money Trading

There is always the temptation for forex beginners to get so excited by the prospect of making tons of money from forex as pitched to them by their gurus and experts that they forget that a journey of a thousand miles always begins with small steps. Many retail traders rush off to open forex accounts with top forex brokers using large sums of money and invariably, they lose it all. Not engaging in proper trade simulations with real money is one of the commonest reasons. Demo trading is good, but no amount of trading with virtual money can ever prepare a forex beginner for real money trading.

It is not a very good idea to transit from a demo account to a large real account. Part of a new trader’s initial training must include a practical simulation of real money trading situations, and one of the ways to do this is to start trading a real money account with a little money.

A micro account is what a beginner in forex needs to make this transition. Nearly all the top forex brokers in the market today offer a micro account which can be used for this purpose. The initial steps for a beginner are always a learning curve which produces valuable lessons. This brings us to the question: what are those lessons that a new trader can pick up from trading initially with a real money micro account?

a) Starting off with a forex micro account is the best way to experience the psychology of trading with real money. If the money isn’t real, the trader will never get the feel. To get the feel, you have to trade for real. Real money produces real passion and real emotions, but it is better to experience this without breaking the bank or losing big money.
b) Money management is an essential survival skill in forex trading. Every forex trader will lose money at some point. What sets those who end up profitable apart from those who don’t, is the ability to manage the losses when they occur. This is the bedrock of money management. Many traders do not have this skill and unfortunately, it is not taught in many forex seminars. By learning how to set trades with the right position sizes, new traders will be armed with arguably the most important survival skill that they will need in their forex trading careers. Money management can be viewed in the context of managing finances in everyday life. If you have a little money, you are more likely to spend your money a lot more carefully and not just buy anything which catches your fancy. It is the same thing in forex. A micro account has little money; you have to set just the right position sizes on trades that present better opportunity at profit, and all within the acceptable levels of risk. With a micro account, you cannot afford to set trades recklessly.
c) Some top forex brokers even provide no-deposit real accounts which mimic forex micro accounts. These serve as a good way to start for those who do not want to make a financial commitment ab initio.

What is the Acceptable Minimum Deposit for a Micro Account?
Several brokers offer the opportunity to open forex micro accounts for just $1. There are top forex brokers that offer micro accounts for a minimum deposit of at least $200. The amount does not really matter too much. What matters most is whether the broker offers lot sizes that allow the trader to setup trades in a manner which conforms to acceptable risk standards when matched with the account capital. Market technicians agree that traders should not expose more than 3% of their accounts in active trades. So if you have a forex micro account that offers a certain amount as the minimum deposit amount, you are allowed to put in more money if the lot sizes cannot allow trades to be setup within the 3% risk standard.

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Generally speaking, it is advisable to use forex micro accounts that offer the opportunity to deposit at least $200 in them. This is because the lot sizes that can be used to setup trades on a real money account closely mimic what the trader will eventually do in the market. It is essential that the initial run with a real money account closely mimics the trading situations that the trader will encounter further down the road.

You can quickly get access to forex brokers who offer access to a sizeable forex micro account. Some of these top forex brokers can be seen on this forex brokers comparison table. Take time to study the trade conditions offered by these forex brokers so as to see if they match your requirements. Use them, get used to real money trading and enjoy the ride.

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Eno Eteng
About the Author
Eno Eteng has worked for several companies involved in the forex markets as a trader and strategy developer since 2009. He also writes about the financial markets and the software used in these markets and his articles can be seen on several forex blogs and broker educational websites.

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