Mini Forex Accounts
Mini forex accounts are used mostly be people who are just starting in the forex market and don’t possess enough funds to operate a regular account. The difference could be understood from the fact that a regular account could be opened with at least two and a half thousand dollars or more while the minimum for a mini forex account starts from $25.
CONTRACT SIZES
Another advantage of mini forex account is its contract sizes. For a regular forex account, the lot sizes must be about hundred thousand while for a mini forex account the contract sizes are ten thousand. This means that mini forex contract comes out to be one tenth of the regular contracts.
ADVANTAGES OF FOREX MINI ACCOUNT
Well, there are a lot of advantages of a forex mini account. The best thing is that with a forex mini account you get to enjoy benefits which are enjoyed by the holders of regular forex accounts. Some of these benefits are small spreads, free trading platforms etc.
USING $25 TO TRADE 10,000
There is a term which is very commonly used in the world of forex mini account. It is leverage. It could be understood as a facility that allows you to trade more than your deposits. For a mini forex account, the margin deposit needed for every $10,000 lot traded is $50. Now, you do the math. A simple calculation of dividing the two quantities would tell you that the leverage here would be 200 to 1. If you deposit just $250 in your mini forex account; it means that you can trade a maximum of five lots. Increasing the deposit to $1000 would allow you to trade a maximum of 20 and so on.
Compare this with a regular forex account. The leverage there is just 4 to 1 for account holders having $25,000 or more in their account. This means that the leverage of someone having mini forex account is fifty times higher than a regular forex account. It is true that higher leverage could not always be used but what it does is that you get some distinct advantages in terms of flexibility in changing the strategies as per the changes in forex market.
EXAMPLES OF MINI FOREX TRADING
Suppose you have a regular forex account and you have a 25-pip stop loss. This means that you have a potential loss of $250. Now, think from the stand point of mini forex account. It is one tenth of the standard contract and as such the potential loss would be just $25.
The value of pip would also be one tenth of the standard forex account. It is $10 a pip for a regular account while it is just $1 for a mini forex account. What this means is that it gives traders with mini forex account far more flexibility in trading and in managing risks.
The concluding point here is that if you have less than $10,000, it is always a good idea to open a mini forex account. In addition to the benefits of better maneuverability and flexibility, what it does is that it gives a trader better staying power in the forex market as he gets to enter into multiple trades without actually over exerting his leverage.
Interested in trading Forex? Read our reviews to learn which brokers offer the best platforms and mini trading accounts.
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