Forex Mini Account Trading Explained
Forex mini accounts are a great deal for those just getting started in forex trading. To start right out with a standard account you would have to be very confident or very rich if you are a retail trader (i.e. somebody trading on their own account from home). With a mini account you can get started without risking so much money which makes it a very attractive option for many traders.
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.
Because currency trading works with leverage, you do not have to have this much in your account. If you are using 100 times leverage then you need $1,000 to control $100,000 for a standard account and $100 to control $10,000 in your mini 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.
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 can expect to commit $100 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 don't have to risk all of the funds that you have committed to the trade. But your losses will be measured in terms of pips and these too will be ten times more in the standard account.
You may want to move up to trading greater sums if you are successful and your fund grows. By trading more than one lot at a time, you can still do this in your mini account. So you would just trade ten mini lots if you want to trade a standard lot size. Because your pip size is still just $1, this has the advantage of still giving you the ability for fine control of your stops.
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.
If you want to risk even less of your money, you can make even smaller trades by using a forex micro account. You might find it difficult to profit with a micro account though because the spread is often a little high. It may be better to use a demo account until your confidence builds and then for real trading, open a forex mini account.
I'm sure you probably have a lot more questions about forex mini accounts... - 23199
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.
Because currency trading works with leverage, you do not have to have this much in your account. If you are using 100 times leverage then you need $1,000 to control $100,000 for a standard account and $100 to control $10,000 in your mini 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.
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 can expect to commit $100 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 don't have to risk all of the funds that you have committed to the trade. But your losses will be measured in terms of pips and these too will be ten times more in the standard account.
You may want to move up to trading greater sums if you are successful and your fund grows. By trading more than one lot at a time, you can still do this in your mini account. So you would just trade ten mini lots if you want to trade a standard lot size. Because your pip size is still just $1, this has the advantage of still giving you the ability for fine control of your stops.
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.
If you want to risk even less of your money, you can make even smaller trades by using a forex micro account. You might find it difficult to profit with a micro account though because the spread is often a little high. It may be better to use a demo account until your confidence builds and then for real trading, open a forex mini account.
I'm sure you probably have a lot more questions about forex mini accounts... - 23199
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posted by X - Men @ 1:13 AM
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