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.
To effectively practise micro-trading it is important to carefully choose your technical indicators. We recommend you favour the stochastic type with a one minute time unit which are the best adapted to this speculative method.
Start therefore by displaying a 21 period stochastic on a one minute chart at the precise opening time of the market, then wait for this indicator to show an overbuy zone, of 80 or more, or an oversell zone of less than 20. You can then take position at the crossing point of the two stochastic lines. You will of course taking a buying position if the crossing point is in the oversell zone and a selling position if the lines cross in an overbuy zone.
It is however important to note that once you have passed through these steps, you need to ensure your profits and limit any possible losses through the judicious placement of stop orders, preferably on the intermediary troughs or on successive peaks.
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.