What is micro-trading?

When trading on the Forex or conversing with other investors, you may already have heard about micro-trading or micro-accounts for trading without really understanding the meaning of these terms nor their interest. Micro trading is one of the most popular speculation methods at the present time and is appealing to increasing numbers of traders throughout the world. To enable you to better understand the micro-trading advantages, here are some explanations.  

72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. This is an advert for trading CFDs on Plus500
What is micro-trading?

Micro-trading: What is it?

“Micro trading” is basically trading on the Forex using a micro-account. These Forex micro-accounts offer a certain number of advantages as well as disadvantages which we will try to explain below.

The Forex micro-accounts are basically the same as the mini-trading accounts, in the sense that they are accounts allowing investors to trade smaller amounts than is possible in the traditional manner.

In fact, micro-trading basically enables you to speculate on currencies and their exchange rate, but with lower transaction volumes, that is to say just a small part of what is normally possible through the traditional Forex trading accounts. Of course, the profits are also smaller as well.

 

What are the advantages of micro-trading?

Micro-trading offers many advantages one of which is the fact it is particularly appropriate to individual investors who do not yet know the basics of online trading and the foreign exchange market.

The operations offered are smaller and the transactions are smaller in volume, therefore they do not pass through the interbank foreign exchange market. Generally, it is the broker company or Forex broker with which you opened your micro-trading account, which is responsible for the monitoring of the market on which your orders are passed.

Of course, the Forex brokers who offer this type of trading with less expense and less risk, have the means of protecting themselves from the risks and can therefore offer very acceptable spreads and rates against highly aggressive competition.

To choose micro-trading can therefore be an effective way to start to speculate on the Forex currencies.

 

What are the disadvantages of micro-trading?

Of course, micro-trading does have its share of disadvantages. For example, the brokers generally pay a specific rate if your positions remain open apart outside of the market opening times. This of course directly impacts your profits and therefore your performance. To avoid this inconvenience, you can choose to trade only during the opening times, or compare the fees applied between all the platforms before making your choice of broker.

 

The basic requirements for micro-trading:

As the micro-trading strategy is a little delicate it is more suitable for experienced investors who know the markets quite well as well as their operation and are used to online trading.

However this method is also particularly suitable for traders who do not have much time to devote to the markets, although it still requires assiduous attention.

 

Micro-trading in practice :

To practice micro-trading, it is important to choose the right technical indicators. Among the indicators most often used with this method are the stochastics with a unit of time per minute, which are the most suitable for this method of speculation.

This indicator is best used with a customisable stock market graph allowing live display and online interpretation. For this interpretation, you must of course be familiar with the stochastic indicator method in order to make the right decisions about when and where to take positions. As a reminder, the interesting points to study with this indicator concern the crossing points of the two lines which may appear in overbought or oversold situations.

But be careful, in addition to using this indicator, you must also take into account other factors that may influence the market and secure your gains and limit your potential losses by judiciously placing your stop limit and take profit orders according to your strategy.

 

What needs to be done before opening a micro-trading account?

Before you start in micro-trading, you should pay careful attention to choosing the best possible broker by comparing the spreads offered, as well as the penalties and various rates applied. Do not forget however to take into account other factors such as the ease of use of the trading platform or the tools available.   

The various micro-trading offers which you see on the Internet are increasingly numerous since the market is increasingly popular. It is only by looking closely and consulting the general conditions of each one of these brokers that you will be able to make the best possible decision. Also, do not hesitate to ask advice from the more experienced traders who have already tested this trading method in the micro version.

72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. This is an advert for trading CFDs on Plus500