Forex Trading Mini Account Trading: Why Is It Essential For Newbie Foreign Exchange Traders

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Forex mini trading accounts are best for just about anyone who is getting engaged in foreign exchange trading. You would have to be very well-capitalized or very optimistic to start right out with a standard account if you are a retail trader (i.e. someone trading on their own account from home). A mini account lets you get involved without risking big amounts of money and this makes it a very appealing alternative for most individuals.

Mini foreign exchange 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.

Of course you do not need to have this much in your account. Forex trading works with leverage. If you are using 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 sufficient for most traders 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 currency cross that you are trading, the lot size and other rules of your broker, but typical standard pip size is $10 and mini pip size is $1.

Many brokers are now providing prices to 5 digits behind decimal point 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 can put up $1,000 on every trade, be involved in trading lots of $100,000 and calculate your profits in $10 units.

If you have forex mini account you can expect to put up $100 or its multiple on every trade, be involved in trading lots of $10,000 and calculate 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 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 profitable and your equity size grows, you may want to move up to trading larger positions. You may 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 ability for fine tuning of your risk because your pip size is still just $1.

The standard account used to be all that was available before so many individuals had powerful home computers and high speed internet access that made it viable for the common person to trade from home. The forex mini account is an achievement that has opened up the market to individuals who have the technology but not the capital for standard forex trading investment. Even if you are rookie trader, using reliable forex signals you can rake up substantial capital within a relatively short time. Accurate forex signals should be an integral factor of every individual traders' forex trading strategy.

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