Foreign Exchange Trading Mini Account Trading: Why Is It Important For Beginner Currency Traders
Forex mini trading accounts are best for just about anybody who is starting out in forex trading. You would have to be very wealthy or very confident to begin with a standard account if you are an independent trader (i.e. someone trading on their own account from home). A mini account lets you get engaged without risking large amounts of money and this makes it a very attractive option for most traders.
Mini forex trading accounts usually let you to trade with just one tenth of the normal lot size. This usually means 10,000 units of currency instead of 100,000.
Of course you do not need 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.
$100 or 100 units of other currency per trade is sufficient for most people to commit to a trade when they are starting out and that is why the mini trading account is so popular.
The pip size is also typically smaller in a mini account. Pips are units in which you will measure your profits, losses and costs (the spread). Their dollar value can vary depending on the currency cross that you are trading, the lot size and other conventions of your broker, but common standard pip size is $10 and mini pip size is $1.
Some brokers are now providing prices to 5 decimal places which actually would make one pip 0.00001 of the quoted price, but we will continue to use the standard 4 decimal place pip for this instance.
So if you have a standard forex trading account you can put up $1,000 on every trade, be involved in trading lots of $100,000 and measure your profits in $10 units.
If you have forex mini account you can expect to commit $100 or its multiple on every trade, be involved in trading lots of $10,000 and measure your profits in $1 units.
Certainly you can set stop losses if you don not want to to risk all of the cash that is committed to the trade. But your losses will be calculated 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 positions. You can still do this in your mini account by trading more than one lot at a time. So if you wish to trade a standard lot size you would just trade 10 mini lots. This has the benefit of still giving you the ability for fine tuning of your stops because your pip size is still just $1.
The standard account used to be all that was available before so many people had powerful home computers and high speed internet access that made it possible for the common people to trade from home. The forex mini account is an achievement that has opened up the market to people who have the technology but not the money for standard currency trading investment. Even if you are newcomer trader, using reliable forex signals you can accumulate significant account balance within a relatively short time. Accurate forex signals should be an integral factor of every individual traders' forex trading strategy.
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