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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?
If you are a novice trader aiming to gain practical experience in the real market with minimal to no risk, the cent account is an excellent option. Conversely, if you seek a greater potential for profits, the micro account would be more suitable.
To compare between the two, here is an insight of cent vs micro account that may help you.
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: Lowest Deposit Forex Brokers
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.
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.
See Also:
Conclusion
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. That's why applying the risk-reward ratio is important.
10 Comments
Thobane
Oct 30 2021
Hi, Dwirachmat, you've really broken down these two types of accounts thoroughly. All crystal clear and simple, cheers heaps for that. I picked up a ton from this article. Keep doing the great work as a writer with precision, eh? 😊
Andy Wijaya
Nov 14 2022
Sure look, a cent account gives you a real bit of profit, like. So when you're making a few bob, you're getting money, and when you're taking a hit, you're losing a few quid, but it's only a tiny amount. This means you can train your headspace before you dive into the micro accounts, you know? I reckon for those starting out and wanting to test their forex trading strategy, a cent account is the way to go. If your strategy testing goes grand, and you're making more profit than loss in every trade, you can step up to the next level with a micro account.
But, if you're getting more losses than wins with the cent account, it's a good way to feel the ropes and deal with emotions that you won't get with a demo account. Sure, there's the FOMO feeling (you need to train your head and emotions to steer clear of that), margin calls, setting things up, and getting the hang of the leverage your broker's throwing at you, or even figuring out how to put some money in there. It's a grand learning experience you won't get with a demo account, I'll tell you.
I found it a bit of a yawn sticking with the demo – didn't reflect the real craic at all. As the author said, not all brokers have these cent accounts in their bag of tricks. So, if you fancy giving the cent account a go with some real moolah, be sure to check if your broker lets you open one before you sign up. Cheers!
Rodrigo
Dec 9 2022
Andy Wijaya: For me, micro accounts are more challenging. We know that losing is more real, but gaining is also more real. Cent is boring and unrewarding, I jumped right into the market without a demo account. I think micro accounts really capture the true picture of live trading. I touched the cent account, and sometimes I get a lot of pips, but when I get a big profit, the profit is only $1-2, but with scalping, I get only 0.1-0.5 cents. I think this win is totally worthless and more like a demo account.
Hans Stuart
Feb 5 2023
Rodrigo: I think it would be better to use a micro account if your trading strategies are ready. I mean, the cent account is really one more step in Forex Learning Trading. Therefore, the mentality of wanting to get big profits must be removed. It is good to start thinking about making your first profit from the forex market, but never think that a cent account will be profitable.
The cent account is used to test all your risk management and money management abilities, as well as your ability to monitor the markets. It's time for demo account traders to take it to the next level, with very near zero risk.
So for me, of course, a cent account can be a great live trading teacher, but not profitable
Agustian
Feb 5 2023
It's quite fascinating to trade with a penny account, you know, because my local brokers don't provide that option. I mean, as a beginner trader, I've just started off with a demo account to get the hang of things and train my psychology. I reckon this cent account offers a mix of demo account vibes and a taste of the live market, you see.
Now, the real question is: do they charge spreads and commissions in this account? You know how some brokers leave out spreads in demo accounts, leaving traders a bit bewildered when they switch to live trading. They don't realize that in the demo account, they're still making a bit of profit because the spread isn't factored in.
And, on this site, BrokerXplorer has an article breaking down which brokers offer these penny accounts, you know?
Rino
Feb 5 2023
Agustian: Most brokers that offer cent accounts will not charge a commission but will charge a spread. So, you have to charge the spread as a transaction fee. But I think the commission is not so important to find out as they will charge a flat fee, unlike the spread which can be floating and can be different each time (if you are trading with floating spreads)
Regarding articles, you can read this article about the list of brokers that offer cent accounts:
Rowan
Feb 5 2023
I don't really use US dollars, you know. So, I don't have the exact value in cents against dollars. But I have to say, if you're trading with cents, the risk of losing starts in cents too. That means you can cut down a lot of risk with a cent account. But, I really want to know, how many cents equal 1 dollar?
And I'm a bit puzzled about the picture comparing micro lots and coin lots. I mean, how does one get 0.01 lot equal to 0.1$? And what about coins, like, how many coins can you get with 0.01 lot in cents? The picture shows the same 0.1, but in the cent account column, it doesn't show how many cents I'll be getting.
Teddy
Feb 5 2023
Rowan: The pictures show the pip value comparison is correct. Because you can count manually with this formula
Tick size x lot size
Ticks size usually 0.001 and meanwhile lot size either can be standard, mini or micro.
So if you want to calculate a micro lot, the result you get is 0.001 x 1,000 = 0.1 USD.
Whereas cent lots are only 100 units, which means that 1 pip movement out of 1 cent lots is $0.01 (1 cent lot). And normally a trader will use a 0.1 cent lot account whose pip value will be $0.001
Whereas, 1 dollar = 100 cents (that's why the table said 1 USD = 100 unit), the lot of 1 cent will be worth 100 cents x 0.01 = 1 cent. And if you trade with 0.1 cent lot you will get 1 pip move value of only 0.1 cent which is very little profit
Michael
Jan 12 2024
I believe the Cent account could be a practical solution for beginners venturing into trading. According to the article, it operates on a cent-based system, where both losses and profits are calculated in cents. For instance, with 1 lot equaling 1 cent, 0.1 lot corresponds to 0.1 cent. This setup proves particularly beneficial for novices who might find the demo account environment less appealing.
I have some questions about the Cent account based on the article. It mentions that not many brokers offer this feature due to its relatively small size. I'm curious as to why this is the case. After all, a Cent account seems like it could be more appealing to traders, especially those who are just starting out.
Pandu Suryo
Jan 16 2024
Hey there! As for the limited availability of Cent accounts among brokers, the primary reason might be related to the smaller size and potentially lower profitability associated with these accounts. Brokers often need to cover operational costs, and the reduced size of Cent accounts may result in lower transaction fees and commissions. Additionally, managing a high volume of Cent accounts could pose administrative challenges for brokers.
While the Cent account offers a practical learning ground for beginners, brokers may prioritize offering standard or larger accounts to attract more substantial trading volumes. However, it's essential for brokers to recognize the appeal of Cent accounts for newcomers and consider striking a balance to cater to a diverse range of traders.