Forex cent accounts – what are they and why are they needed?

Hello everyone! Many novice Forex traders do not fully understand the difference between standard (classic) and cent accounts. Therefore, I decided to write this little article in order to clarify.

In this lesson, we will analyze: where to open a cent account, what it is, and in what cases you need a cent account, even if you have enough money to trade on a regular account.

What is the difference between classic and cent accounts?

Standard account:

The balance is displayed in dollars
Min. lot 0.01
1 pips with lot 0.01 = 0.1 $

Cent account:

The balance is displayed in cents, a $ 20 deposit will look like 2000 cents in the terminal.
Min. lot 0.1, but since the balance is in cents, then 1 pips of price movement with a lot of 0.1 will be equal to $ 0.01, that is, only 1 cent.

With a lot of 0.1 on a cent account, 1 point of price movement will cost $ 0.1.

Example:

In the screenshot above, we see that the account balance is 17,000 USD. Cool, yeah?)

But only this is a cent account, which means we can safely remove 2 zeros at the end (divide by 100) in order to find out the real equivalent of funds on a cent account.

In this example, if we decide to withdraw funds from the account, the broker will withdraw $ 170 to us. Not 17000 🙂

Thus, if you open a cent account and deposit it with $ 100, then you will see 10,000 USD on the balance in the terminal.

Further.

Let’s consider an example of a trade on a cent account:

You bought GBPUSD with lot 0.1 at 1.3897 and later closed the buy at 1.3911.

They made a profit of 14 cents.

With a lot of 1.0, you would have earned 140 cents or $ 1.4 in this example.

How to open a cent account?

To open a cent account, you need a broker who has this type of account.

Not all brokers provide the opportunity to open a cent account.

How to understand which type of account with a broker is a cent account?

Carefully read the section “Types of accounts” on the broker’s website.

A cent account can be called quite obviously, for example, Nano.mt4 from Alpari. Or Cent (micro) account from RoboForex.

Everything is clear here – Cent means cent account.

But this type of account can also be called Micro, like XM Group.

Therefore, you should carefully read the description of the types of accounts from the broker.

Otherwise, the procedure for opening and depositing cent account is no different from ordinary accounts. For some brokers, when depositing / withdrawing funds from a cent account, you need to indicate the amount in cents, be careful.

When do you need a cent account?

To try trading, risking the minimum amount

The demo account, unfortunately, does not give a sense of the reality of money on the balance.

A cent account allows you to feel the sensations of both earnings and the loss of real, albeit small, funds.

Psychology plays an important role in trading, many well-known traders advise not to use demo accounts at all, but to trade on small accounts until you learn how to trade stable. A cent account is perfect for this purpose.

Why do I need a cent account, because on a regular type of account the minimum deposit is often $ 10?

Yes, you can trade with a small deposit and on classic accounts, but the cent account allows you to use a full-fledged accurate money management.

Example

You have $ 200 on a classic account with a minimum lot of 0.01.

You want to open a trade with a stop-loss of 100 old pips (for example, trading on D1), while risking 1% of the deposit.

But this is unreal 🙂

Since your minimum lot is 0.01, the loss from a stop-loss of 100 points with a lot of 0.01 will be $ 10. That is 5% of your account.

Now let’s imagine that you opened a cent account with a deposit of $ 200, which turned into 20,000 balance units.

You want to open the same trade with a stop-loss of 100 old pips, risking 1%.
You should open the trade with lot 0.2.
With a stop loss, you will lose 200 balance units in this position. Or 1% deposit.
The risks are met due to the peculiarities of the cent account type.

2. Test account to test the strategy / expert advisor

With this, I think everything is clear. Check the performance of an EA or a manual strategy on real, albeit small, money. In case of successful tests, transfer the system to a traditional account type.

3. An account where everything is possible

Has this ever happened to you: you see on the chart that now there is definitely a reversal! Straight 100%! But there is no formal signal for your strategy. And You want to open a trade 🙂 How to be?

Do not touch the main account, but open all emotional and non-standard trades on a cent account, your special “casino” account.

In this way, you will quench your thirst for trading. If your “insights” are correct, then you will earn a little, but if, as most likely, they were only an emotional reaction to the market, then you will also lose a little.

4. Robots based on order grid trading

Perhaps the most common use of a cent account.

There are a great many, hundreds, thousands of Expert Advisors that use a grid of orders in trading.

What is this strategy?

Everything is very simple. Currency pairs tend to return to average price values. This is a feature of the Forex market. If the price goes against our position, for example, sell, we can not close an order with a loss, but open another one. Perhaps even a slightly larger lot. And then, when the price continues to go against us, we will open another order. Etc.

When the price finally turns in our direction again, since we opened orders with a large lot, we need a much smaller movement in order to break even on a series of orders. Or even profit.

The essence of the method is shown in the image below:

It is worth noting that such strategies are not ideal and are lost on strong trends.

Why do we need a cent account for such systems?

Everything is the same as in the example with money management above. Only in the case of grid robots, we need not only the accuracy of the lot calculation, but also a lot of orders. In some robots, the count goes to tens.

On the classic type of account, such strategies often require $ 5,000-20,000. A considerable amount of money for trading a risky (and such strategies are risky) system, isn’t it?

Therefore, it is quite reasonable to get by with an amount 100 times smaller on a cent account.

Conclusion

Well, I hope you now understand that the cent account is not only for the poor 🙂 There are situations and trading systems where it is technically necessary.

Take care, Michael

Forextraderportal.com

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