Forex Mini Account Trading Explained
If you're interested in forex trading, forex mini accounts are an ideal way for just about anybody to start. If you are a retail trader (i.e. somebody trading on their own account from home) you would have to be very rich or very confident to start right out with a standard account. What makes a mini account a very attractive option for most people is that it allows you to get started without risking so much money.
The normal lot size of currency is 100,000 in forex trading and mini forex trading accounts generally allow you to trade with 10,000 units or one tenth the normal lot size.
Of course you do not have to have this much in your account. Currency trading works with leverage. If you are using 100 times leverage then you need $100 to control $10,000 in your mini account or $1,000 to control $100,000 for a standard account.
For most people starting out, $100 or 100 units of other currency per trade is enough. That's what makes the mini trading account so attractive.
In a mini account the pip size is also usually smaller. Pips are units in which you will measure your costs, profits and losses (the spread). Depending on the currency pair that you are trading, the lot size and other conventions of your broker their dollar value can vary. A common mini pip size is $1 and standard pip size is $10.
Some brokers are now quoting prices to 5 decimal places which technically would make one pip 0.00001 of the quoted price, but we will continue to use the standard 4 decimal place pip for this example.
So if you have a standard forex account you can expect to put up $1,000 on each trade, be involved in trading lots of $100,000 and measure your profits in $10 units.
If you have a forex mini account you will measure your profits in $1 units and you can expect to commit $100 on each trade and be involved in trading lots of $10,000.
Of course you can set stop losses so that you do not have to risk all of the money that is committed to the trade. But your losses will be measured in terms of pips so these too will be 10 times greater in the standard account.
If you are successful and your fund grows, you may want to move up to trading greater sums. You can still do this in your mini account by trading more than one lot at a time. So if you want to trade a standard lot size you would just trade 10 mini lots. This has the advantage of still giving you the ability for fine control of your stops because your pip size is still just $1.
High speed internet connections and powerful home computers have made it possible for the ordinary person to trade from home. Now many people who used to only have the standard account available to them are trading regularly. The forex mini account is a development that has opend up the market to people who may not have the money but have the technology for standard currency trading investment.
You could look at forex micro accounts if you want to risk even less of your money. Forex micro accounts allow you to make even smaller trades. Be aware though that the spread is often a little high and with a micro account you might find it difficule to profit. Until your confidence builds it may be better to use a demo account and then open a forex mini account for real trading.
I'm sure you probably have a lot more questions about forex mini accounts... - 23305
The normal lot size of currency is 100,000 in forex trading and mini forex trading accounts generally allow you to trade with 10,000 units or one tenth the normal lot size.
Of course you do not have to have this much in your account. Currency trading works with leverage. If you are using 100 times leverage then you need $100 to control $10,000 in your mini account or $1,000 to control $100,000 for a standard account.
For most people starting out, $100 or 100 units of other currency per trade is enough. That's what makes the mini trading account so attractive.
In a mini account the pip size is also usually smaller. Pips are units in which you will measure your costs, profits and losses (the spread). Depending on the currency pair that you are trading, the lot size and other conventions of your broker their dollar value can vary. A common mini pip size is $1 and standard pip size is $10.
Some brokers are now quoting prices to 5 decimal places which technically would make one pip 0.00001 of the quoted price, but we will continue to use the standard 4 decimal place pip for this example.
So if you have a standard forex account you can expect to put up $1,000 on each trade, be involved in trading lots of $100,000 and measure your profits in $10 units.
If you have a forex mini account you will measure your profits in $1 units and you can expect to commit $100 on each trade and be involved in trading lots of $10,000.
Of course you can set stop losses so that you do not have to risk all of the money that is committed to the trade. But your losses will be measured in terms of pips so these too will be 10 times greater in the standard account.
If you are successful and your fund grows, you may want to move up to trading greater sums. You can still do this in your mini account by trading more than one lot at a time. So if you want to trade a standard lot size you would just trade 10 mini lots. This has the advantage of still giving you the ability for fine control of your stops because your pip size is still just $1.
High speed internet connections and powerful home computers have made it possible for the ordinary person to trade from home. Now many people who used to only have the standard account available to them are trading regularly. The forex mini account is a development that has opend up the market to people who may not have the money but have the technology for standard currency trading investment.
You could look at forex micro accounts if you want to risk even less of your money. Forex micro accounts allow you to make even smaller trades. Be aware though that the spread is often a little high and with a micro account you might find it difficule to profit. Until your confidence builds it may be better to use a demo account and then open a forex mini account for real trading.
I'm sure you probably have a lot more questions about forex mini accounts... - 23305
About the Author:
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posted by Mr. Forex at
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