Choosing a reliable broker is probably the most crucial step for a novice trader. That’s where Forex cent account brokers step in. These services offer a unique opportunity for beginners to trade not in dollars but in cents. However, is everything so good in this strategy? Let’s see!
Why deal with Forex brokers offering such accounts?
Forex trading is conducted in lots. Its standard size is 100 thousand currency units. For example, for the USD/CAD pair, this is 100 thousand US dollars.
And if we are talking about a cent deposit, then one lot is 100,000 cents, that is, $1,000.
Let’s look at this with an example. Suppose you want to open a 1 lot trade to buy USD/CAD. If you do not use leverage, then for this you need a deposit of 100 thousand cents.
The price of one point, in this case, will be 10 cents. If the pair goes up by 10 pips, your profit will be equal to 100 cents, that is, $1. And if the price falls by 10 points, the loss will also be equal to 100 cents ($1).
In the case of a regular account, both profit and loss would be 100 times greater. This is the main plus but at the same time the main minus of cent deposits.
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Benefits of accounts of the cent type
There is no doubt that having such an account is a more useful activity for a trader with 0 experience. Here are the most common reasons to turn to this opportunity:
- low costs in trade;
- trading on the same terminals as in the classic version;
- risk and money management training;
- checking the feasibility of the strategy used;
- testing various methods and trading strategies;
- evaluation of signals and indicators, chart analysis;
- low risks;
- psychological preparation, control over one’s own emotions, stress resistance;
- many Forex cent account brokers provide deposit bonuses.
As you can see even an experienced trader can opt for an account of the cent type (to try strategies, play with some new indicators, etc.). This deal is really a versatile solution for various issues.
On the other hand, trading in cents brings some obvious drawbacks. Be sure to know them prior to creating an account:
- Low profit – we have already talked about the fact that with the same lot sizes, it is a hundred times less than on a standard account;
- Low liability of the trader – often the player takes risky trades, as they understand the insignificance of losses. This habit is dangerous when switching to trading from a classic account;
- Forming the habit of easy trading.
At first sight, the downsides are quite understandable. But they don’t impact the novice trader training that much.
For those who want to succeed in Forex, an account of the cent type is essential.
Learned all the basics of trading? Completed a course or watched over a hundred tutorials on the web? 100% sure that this occupation is for you? Then it’s time to open this account in order to move on to the classic one in a few months!