There was a time, when in order to open an account and start trading in the market, one should have had $500. Therefore, many of those who wanted to try their hand in the financial markets, just could not afford it. The bigger competition has radically changed the situation. In addition to the recognized market leaders there emerge new brokerage companies, yet unknown but willing to develop, which offer account opening with much lesser sums. The sums have been decreasing, and there appeared forex brokers with cent accounts.
Cent accounts are trading accounts in the foreign exchange market with balance measured in cents instead of the US dollars. Trading accounts dealing in cents are handled the same way as any US dollar account with the only difference being the nominal amounts. The Cent Account has been designed for small depositors and newcomers to the forex industry. It is most suitable for those who wish to trade with a lower deposit and grants access to the markets to all those who want to trade but cannot risk losing too much.
Retail brokerage companies say that cent accounts can be useful to forex beginners since they allow trading with real money without risking too much. Cent account balance is indicated in cents, which helps beginners get accustomed to seeing sums of many thousands on their accounts. Cent account is a kind of a transitional stage between demo and dollar accounts being a first step into a real trading, an opportunity to decrease the minimum available position size to 0.0001 of a standard lot. There is no minimum or maximum deposit and no other specific requirements to open a cent account.
The advantage of a cent account is that is lets you trade ‘for real’, thus getting used to actual trading and at that not risking to lose a large sum of money. It can be used not only by traders; if you decide to test trading conditions offered by a certain broker or a new strategy and don’t want to put your money at risk, forex cent accounts should be your choice. The disadvantage of cent accounts is that the majority of forex brokers offering such a service limit the maximum account and position size to keep the usage down to a minimum. Also, the cent accounts are associated with higher quote spreads to compensate brokers.
No matter what account type you choose, you should always take a test drive first. Most brokers offer demo accounts and other platforms for traders to get comfortable with before jumping in. As a basic rule of thumb, never put money into a forex account unless you are 100% satisfied with the investment being made. With all the different options available for forex trading accounts, the difference between being profitable and losing your shirt can be as simple as choosing the right account type.