Forex Mini Trading – 7 Things You Really Ought To Know
Trading the forex market using a mini account is a great way to get you started in forex trading. Below are 7 things you really ought to know when opening a forex mini trading account.
1. Minimum Amount
Mini forex accounts are usually opened by traders who are new to the forex market and do not have the funds to open a regular account. A forex mini account can be opened with as little as $50 to about $300, whereas a regular account usually requires $2,500 or more.
2. Mini Account Contract Sizes
In a mini account, the minimum trading lot size or contract size is 10,000 per contract, whereas for a regular forex account, the lot sizes are 100,000. This means that the mini forex contract is 1/10th the size of the standard contracts. The smaller trade size gives traders the opportunity to trade live with less overall risk or exposure to the market
3. No. of Currency Pairs Offered
Most brokers offer the same number of currency pairs that you can trade whether you are using a mini account or a regular account. Just make sure the 6 major currency pairs are there: EUR/USD, GBP/USD, USD/CHF, USD/JPY, AUD/USD, USD/CAD. These currency pairs account for 90% of the total daily FX trading volume.
Leverage allows you to trade more of a currency that you have money in your account. This means that if you have $200 in your mini account and your broker gives you 100:1 leverage, you can trade up to $20,000 in forex. Use leverage carefully. It can magnify your gains but also your losses as well.
Fortunately, with a forex mini trading account, because the lot sizes are 1/10th of the regular contract, your potential losses are also 1/10th the size. For example, if you are trading with a regular account and incur a 30 pip loss, this is equivalent to a loss of $300. With a mini account, this translate to about $30 only.
5. Same Features as Regular Accounts
Forex mini trading accounts are great for traders with less than $10,000 to start. You have all the same features and tools as the regular accounts. That means you will enjoy the same trading platform, charting, market analysis, spreads, customer service, etc. Although the standard trade size is 10,000 units you are not limited to trading one lot! For instance, you can trade 10,000 units, 20,000 units or 80,000 units. This means as you become more seasoned, you can slowly increase the size of your trades to maximize your potential.
6. Develop a Disciplined Trading Strategy
When trading a mini forex account, a 20 pip floating loss is approximately $20. That same 20 pip movement against you on the regular account now becomes a $200 floating loss. By starting with a mini account, a trader loses only a small amount on every losing transaction making it easier to stick to a disciplined trading strategy. Education and discipline trading are key to your success in forex trading.
7. Build Confidence With a Mini Account
Opening a mini account with a broker lets you test out their trade execution time, services and spread movement. Although a broker may advertise narrow spreads, these spread can change during releases of economic data and other important news. It also allows you to test out different trading strategies while minimizing your risk exposure. As your trading confidence grows, you can then upgrade to a regular account.
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