Discover Forex Mini Account Trading PDF Print E-mail
Written by Tom OReilly   
Tuesday, 14 July 2009 11:01
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.
by TomOReilly


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.

With a mini forex trading account you can generally trade with just 1/10 of the normal lot size. Meaning 10,000 units of currency rather than 100,000.

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.

The mini trading account is so attractive for most people because $100 or 100 units of other currency per trade is enough to commit to a trade when they are starting out.

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 measure your profits in $10 units, be involved in trading lots of $100,000 and put up $1,000 on each trade.

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.

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. 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.

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...

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

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