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Forex Trading Mini Account Trading: Why Is It Crucial For Retail Currency Traders
Forex mini trading accounts are optimal for just about anybody who is getting engaged in foreign exchange trading. You would have to be very rich or very optimistic to start right out with a standard account if you are an independent trader (i.e. somebody trading on their own account from home). A mini account lets you get engaged without risking so much money and this makes it a very enticing alternative for most people.
Mini foreign exchange trading accounts typically let 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 have to have this much in your account. Currency 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 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 typically 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 pair that you are trading, the lot size and other conventions of your broker, but typical standard pip size is $10 and mini pip size is $1.
Many brokers are now quoting 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 instance.
So if you have a standard forex trading account you can 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 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 calculate your profits in $1 units.
Of course you can set stop losses if you don not want to to risk all of the cash 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 account balance grows, you may want to move up to trading larger sums. 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 benefit of still giving you the ability for fine control of your stops 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 viable for the common people 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 capital for standard forex trading investment. Even if you are beginner trader, using reliable forex signals you can rake up substantial account balance within a relatively short time. Accurate forex signals should be an integral part of every individual traders' forex trading strategy.
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