Forex Trading Mini Account Trading: Why Is It Vital For Newcomer Foreign Exchange Traders
Currency trading mini accounts are ideal for just about anyone who is getting involved in foreign exchange trading. You would have to be very rich or very brash to start right out with a standard account if you are a retail trader (i.e. somebody trading on their own account from home). A mini account allows you get started without risking big amounts of money and this makes it a very enticing alternative for most people.
Mini forex trading accounts typically allow you to trade with just one tenth of the normal lot size. This usually means 10,000 units of currency instead of 100,000.
Certainly you do not have to have this much in your account. Forex trading works with leverage. If you are applying 100 times leverage then you must have $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 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.
The pip size is also usually 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 forex pair that you are trading, the lot size and other rules of your broker, but usual standard pip size is $10 and mini pip size is $1.
Many brokers are now quoting 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 example.
So if you have a standard forex trading account you may put up $1,000 on each trade, be involved in trading lots of $100,000 and calculate your profits in $10 units.
If you have currency trading account you can expect to put up $100 or its multiple on each trade, be involved in trading lots of $10,000 and measure your profits in $1 units.
Of course you can set stop losses so that you do not have to risk all of the cash that is committed to the transaction. 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 profitable and your account balance grows, you may want to move up to trading larger sums. 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 advantage of still giving you the possibility for fine control of your risk because your pip size is still just $1.
The standard account had been the only one that was available before so many individuals had powerful home computers and high speed internet connections that made it possible for the common person to trade from home. The currency trading mini account is a development that has opened up the market to individuals who have the technology but not the funds for standard forex trading investment. Even if you are beginner trader, using reliable forex signals you can accumulate substantial capital within a relatively short time. Accurate forex signals should be an integral part of every individual traders' forex trading strategy.
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