If you are looking to start trading forex online, then you will already have heard about forex brokers. Online forex brokers play a key role in providing traders with access to the global foreign exchange market.
Different brokers are suited to different types of traders. For instance, if you are a beginner, then you would probably find it best to use a broker that allows micro-lot trading. A micro-lot is a hundredth of one lot, where one lot is equivalent to 100,000 units of a currency pair’s exchange rate.
In this guide, we discuss the best forex brokers for micro accounts. We also provide our list of forex brokers that we believe to be the best for micro account holders.
Our List of the Best Forex Broker for Micro Accounts
We have put together a list of what we believe to be the best forex brokers for micro accounts. When compiling this list, we identified the key aspects of a good forex broker for micro accounts: minimum trade size, regulation, brokerage fees, and spreads. Also, customer support, deposits, withdrawals, and trading tools.
What Is a Forex Broker for Micro Accounts?
A forex broker is a company that provides traders with access to the global foreign exchange market. Unlike the normal exchange bureau where you take one currency to exchange for another, foreign exchange brokers provide traders with access to a platform where they can exchange currencies “virtually” at the prevailing exchange rates. This practice of exchanging currencies virtually, or effectively betting on the exchange rate, is called forex trading.
Over the years, forex brokers have added more trading instruments to their lists, including commodities, cryptocurrencies, stocks, and indices. Traders try to predict the direction the price of the underlying asset (e.g., a currency pair) will move by choosing to buy or sell.
Traders can choose to trade by placing a standard-lot order (which represents 100,000 units of the asset), a mini-lot order (for 10,000 units), or a micro-lot order (of 1,000 units). Micro-lot orders, which limit your risk, can only be placed if you use a forex broker that supports micro accounts.
How Does a Forex Broker for Micro Accounts Work?
Micro accounts allow traders to trade small quantities of a given asset. Generally, when you sign up for a broker, you want to make sure that they allow traders to trade in the smallest quantity possible, called a micro-lot. This is 1% of the standard lot, and it means you can place a trade size of 0.01.
A standard lot represents a potential loss of or profit of $10.00 every time the price of the underlying changes by 1.00 unit (commonly referred to as a pip). Therefore, instead of losing or gaining $10.00, micro account traders lose or gain $0.10 for every pip.
The pip movement is not the only cost a trader incurs in a trade. Depending on the type of broker you choose and the underlying asset, the trader incurs varying costs. These are represented by the bid-ask spread and/or any commissions and fees that the broker may charge when trades remain open overnight. For micro account holders, you want to be able to calculate the potential costs to your trade as accurately as possible.
Fixed spread forex brokers add a markup to the spread whereas floating (variable) spread brokers charge a commission that can vary depending on the volume traded. Some brokers restrict micro account holders to fixed spreads. Floating spread forex brokers allow traders to trade directly based on the prevailing market spreads from liquidity providers, but this service is costly to manage so brokers charge commission fees. Fixed spread forex brokers provide liquidity themselves by taking the opposite side of trade or matching buy orders with sell orders from their client pool.
Key Features to Look Out For in a Forex Broker for Micro Accounts
When choosing your forex broker for micro accounts, there are several key features that you need to consider.
This is the first thing you must look out for. It does not matter how tight the spreads are if the broker is not properly regulated. Proper regulation also depends on your jurisdiction or residence. For instance, a forex broker may be well regulated to offer trading services in the US, but may not hold an operating license in the EU market.
Most brokers clarify minimum trading sizes on their websites. If the broker does not have a micro account or an account that allows traders to trade in micro lots, then that is probably not the right broker for a trader looking to trade in micro-lots.
Tight spreads are good. It means that you are likely to incur lower costs related to the buy-sell (bid-ask) price difference. Specific account types may attract different spreads, but also, different brokers offer varying minimum spreads. All other items being equal, you want to find a broker with the lowest spreads.
You want to make sure that you will be able to easily deposit and withdraw funds from your trading account. Check the deposit and withdrawal methods supported by the broker, the fees for each option, and processing times. Some brokers may offer globally recognized options that are not well supported in your jurisdiction. So, be sure to check that too. But generally, brokers provide bank wire and bank transfer options, as well as debit and credit cards.
Check the list of assets available to traders. Some brokers provide the list on their website, well-detailed with assets put in their different categories and prevailing market spreads. But at times this list can differ from the one on the live trading platform. The broker should at least have all the major currency pairs listed, including EUR/USD, GBP/USD, USD/JPY, and USD/CHF. Gold, Crude oil, and leading market indices should also be on the list.
Most brokers offer a variety of trading platforms to choose from. MetaTrader 4 and MT5 are the most common, but some offer platforms like cTrader and NinjaTrader that have additional trading features. For a micro-account holder, it would be wise to go for the popular options. Some brokers have also developed their own proprietary trading platforms. Most importantly, check that the broker offers mobile trading and a web-based platform so that you can trade from anywhere at any time.
This feature is as important as any other on this list. Some brokers are very proactive when getting a client to sign up, but not so much when the trader seeks help to solve a technical issue. Be sure to check support reviews on leading reviews platforms to see how current and past clients rated the broker.
This feature is mostly offered as an add-on, to make the service more attractive than the competition. In some cases, it’s offered according to the account type. Therefore, be sure to check that educational materials are part of the package for your micro account. Check what educational materials are available for all traders.
Pros & Cons of Using a Forex Broker for Micro Accounts
How to Choose the Best Micro Accounts Forex Broker for Me?
Selecting the best forex broker for micro accounts may not be a straightforward decision for some traders. It is important to know the characteristics you want in your broker. This can involve looking at a range of features including low spreads, low trade sizes, and low deposit requirements.
The most important factor for micro account traders is the ability to trade in micro-lots, which is what we’ve focused on in this guide.
How to Safely Use a Broker to Make Money Online Trading?“ Online trading can be exciting but not everyone who trades forex is successful. To be successful, you must observe some important rules. First, you must kick emotion out of your trading. You must form your strategy beforehand so that when you start trading, you are not reacting emotionally to every event. Commit to risk a maximum of 1% of your account per trade, and up to a maximum of 5% for all open positions. Make use of stop-loss orders to cap your losses. Avoid trading during unpredictable market-moving events. Take trading breaks — a week, a month, or even longer — after a long run of losing trades. Trade with money that won’t affect your lifestyle if lost, so that you can be more patient when trading. ”- Nicholas Kitonyi
In summary, we have discussed the process of selecting a micro accounts forex broker. We have highlighted the key features to look out for and the importance of each feature. We have also discussed how micro accounts forex brokers work and how they may differ from other brokers. Our shortlist of suggested brokers should shorten your decision-making process.
Since the markets can remain irrational longer than you can remain solvent, we included some tips to help you take the emotion out of trading.
Frequently Asked Questions
This is a broker that allows traders to trade in micro-lots. Trade sizes start at 0.01 instead of the standard 1.00.
Yes. But you have to make sure that the broker has an operating license from your regulator.
Yes. Nearly all forex brokers now have mobile trading apps accessible via smartphones and tablets.
Yes. Some add it as a markup on the spread while others charge it separately as a commission that depends on trading volume.
Yes. But you can prevent this by using trading tools like stop loss to limit your losses. Some brokers offer “negative balance protection” to retail traders in certain jurisdictions such as the UK.
A micro account provides access to live trading to give you real experience, albeit at reduced risk. Demo accounts let you trade without risking real money, but this doesn’t subject you to the emotional effects of trading because you know you have nothing to lose.