Secrets of Forex Mini Account Trading Revealed
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.
Currency trading works with leverage. So, of course you do not have to have this much in your account. You need $100 if you are using 100 times leverage to control $10,000 in your mini account or $1,000 to control $100,000 for a standard account.
$100 or 100 units of other currency per trade is enough for most people to commit to a trade when they are starting out and that is why the mini trading account is so attractive.
Pips are units in which you will measure your profits, losses and costs (the spread). The pip size in a mini account is usually smaller than a standard account. A common standard pip size is $10 and mini pip size is $1 but their dollar value can vary depending on the currency pair that you are trading, the lot size and other conventions of your broker.
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.
So that you do not have to risk all of the money that is committed to the trade, you can set stop losses. 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. By trading more than one lot at a time, you can still do this in your mini account. This has the advantage of still giving you the ability for fine control of your stops because your pip size is still just $1.
The forex mini account is a development that has opened up the market to people who have the technology but not the money for standard currency trading investment. The standard account used to be all that was available before so many people had powerful home computers and high speed internet connections that made it possible for the ordinary person to trade from home.
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…
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