What are Forex Cent Accounts Needed For?
Author: Victor Gryazin
Dear Clients and Partners,
In this article, we will review cent accounts and what they are needed for. Such accounts let beginners dive in real trading with minimal expenses and experienced traders – test their trading strategies or robots, as well as some psychological relief.
What is a cent account?
A cent account in Forex is a trading account provided by the broker; the balance is measured in the base currency (US Cent, EU Cent, etc.) denominated 100 times. Trading conditions on cent accounts are almost the same as on real ones. You only need to deposit it for 10 USD to get a 1,000 US Cent deposit.
The Cent account type is widely used for market beginners and those traders who practice or want to test a certain strategy in real market conditions with smallest expenses.
A cent account is always a transition point between a demo account and a classic one, the first step to real trading with a decreased risk. If, for example, a trader wants to work with a capital of 10,000 USD, they only need 100 USD to open a 10,000 US Cent account.
What are cent accounts used for?
Whether one needs a cent account or not, this is always for each trader to decide. One needs it for practicing for real with minimal risks, another – as an account for making unsystematic emotional trades. Let us focus on the main reasons for using cent accounts.
Test trading
This must be the most widespread reason for using cent accounts. Beginners practice their skills on demo accounts, but as long as money is virtual there, they do not include one of the main aspects of trading – the psychological one. Hence, for further development, they need to switch to a real account, and a cent one is a great choice. It allows getting real trading experience and check the working ability of their trading system with minimal expenses.
They can just keep in mind the capital that they plan to use in the market. For example, to check the abilities of a capital of 5,000 USD, they can open a cent account and deposit it for 50 USD to get a 5,000 US Cent capital. As a result, the trader can fully test their strategy on this deposit, risking 50 USD at worst. However, their profit will also be in cents, not in dollars.
In such cases, the trader’s task is not to make a large profit but to train their skills and develop psychological stability. After the trader makes sure their trading is stable (they get a positive result over a reporting period: quarter, semester, year), they may switch to a real trading account.
Psychological vent
Another reason for using cent accounts is making emotional trades that go counter your trading rules. For example, you see on the chart that after some important fundamental news there is a strong active movement. You are sure that a mighty impulse will follow but your trading system does not give any signals in this direction. You want to open a position but this is against your rules, right?
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Sincerely,
RoboForex team