Between cent account and the micro account, which one is better for new traders? Read on to find out the difference between those two so that you can decide which one is more suitable for you.
Many forex brokers offer cent and micro accounts to the newcomers because those types of accounts are actually the right place to start. Cent and micro accounts end up as the two most common next stops after trading in a demo account. You can adjust yourself to the real market where both your profits and your losses are as real as they can get. At the same time, you don't have to worry about big losses and psychological burdens as both cent and micro accounts are specifically designed to keep the risks minimum.
If you end up facing a choice between a cent or micro account, which one would you choose? To compare between the two, here is an insight of cent vs micro account that may help you.
Cent Account Explained
As its name implies, a cent account is characterized by its ability to allow trading on the smallest denomination of a currency, about 0.001% of a standard lot. You can start trading in this type of account with a very small amount of deposit, where some brokers even place no limit on how low the deposit can be.
Unfortunately, this type of account is so small that not many brokers provide this feature. This is to be expected since every trader wants to make some profit immediately and making a couple of cents at a time does not seem very rewarding.
Still, a couple of cents is still something when compared to zero cents you earn from a demo account. Although it is technically possible to earn a huge profit, the main goal of this account is to get you used to the real market at a minimum risk.
A Side Note
As mentioned before, it is technically possible to score a large profit out of this account. This is where leverage comes in. Keep in mind that the leverage can work both ways, it can move alongside you or against you. Therefore, operate an account of high leverage only after you gain some experience on the field. Even with some experience in trading, remember to exercise caution.
Aside from its role as a starting point for new retail traders, the cent account is also useful for some of the more seasoned traders to test out new strategies without risking a lot of money.
Another thing to keep in mind is the fear of loss. Usually, new traders are encouraged to move to a real account as soon as possible because using a demo account for too long may eliminate the fear of loss. Such effect can occur as well on a cent account since the loss can be really small and insignificant to your overall money. But since cent account is a real account where the loss can be realized and affect the condition of the trader's balance, this account sits perfectly between a demo account and a real account.
Micro Account Explained
If a cent account is not quite suitable for you, you can try the micro account. It is one of the three accounts that is offered by a forex broker aside from a mini account and the standard one. This account trades a one hundredth smaller lot than that of a standard account; only $1,000 per transaction. Hence the name micro.
Since this account trades in micro lot, you do not need a hefty sum for deposits. It usually only takes below $50. Such amount is quite small when compared to a standard account that often starts from $500 to $10,000.
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That also means you may not gain a huge amount of profit from this type of account. It does fit its purpose to give a real market experience for novice traders with low risks. In addition, traders can start to train their perception of risk management. As the loss is starting to get real in this account, they may want to risk less of their hard-earned money by using this type of account. Some experts may also use the micro account to test their new strategies in the real market.
That is the main feature of a micro account. The fine details often vary from broker to broker. Please refer to your broker for more details of this account.
Which One Is Better?
To lower trading risks as much as possible, the cent account uses the account currency while the micro account cuts down the minimum trading lot. If the cent account's minimum trading size is converted into a trading lot, it can reach much lower than that of the micro account.
Therefore, it is safe to say that cent account offers fewer risks than micro account and doesn't take as much deposit. If you are a newbie whose purpose is to learn how to navigate the real market with a very small to no risk, the cent account is a great choice. On the other side, you can take the micro account if you want to take on a higher chance of profit.
See Also: Best Forex Brokers with Micro Lot
Furthermore, you need to know that the account currency's display in a cent account would be different as they are denominated in cents (a hundred times smaller than the standard one). You don't have to adjust this perception if you trade in the micro account.
Take the advantage and disadvantage of both micro account and cent account into consideration and contemplate thoroughly. Whether you choose a micro account or cent account, real money has started to be involved here. After all, we are here to make money, not to lose money.
We do wish you a successful trade, but in case your plan goes south, it will not hurt your deposit too much. You still can practice or try out a new strategy or expert advisor without risking too much of your deposit.