Aside from forex trading, the word mini means something small and limited compared to others of the same type. This made me ask, is mini forex designed only for those who cannot afford to trade large? Is mini forex less dangerous when it comes to risking?
- A forex mini account allows beginners to engage in foreign exchange trading account tusing smaller trading sizes, known as mini lots.
- Mini lots are one-tenth the size of a standard lot, meaning they represent 10,000 currency units instead of 100,000 units.
- Trading in mini lots can afford greater forex diversification, as the same amount of capital can be spread across a greater number of currency pairs.
What is a Mini Forex Account?
Mini account allows traders to make transactions using mini lots which is equal to 10,000 (0.1 lot), or one-tenth of a Standard account. Usually, brokers provide a mini account as an option to get new customers who are hesitant to trade with standard lots due to the amount of capital needed.
A mini account used leverage as borrowed funds in to help traders with small capital. For instance, if it’s calculated using a 100 : 1 leverage ratio, trading on a mini account only requires a USD100 margin for each lot to be traded.
Who can use Mini accounts?
Small victories lead to big rewards, and Forex is no exception here.
It simply cannot be that your fortune grows several times in the first days and even months in the market. A substantial profit is earned little by little. It takes energy and time.
Trading is serious work, and those who rely solely on luck are wrong.
A Mini account can help a beginner to achieve small victories, master skills, and trade big whenever they are ready.
In other words, a Mini Forex account is perfect for novice traders. In such a case, it solves the following problems:
- Putting trading and technical skills into practice after demo trading
- Testing a strategy online
- Learning about assets and their price dynamic
- Breaking down an emotional barrier after switching to a live account from a demo one
- Building personal risk-management principles
In addition, a Mini account can help beginners understand what it is like to be a trader and whether such a risky way of making a profit is suitable for them. After all, in spite of all the benefits of demo trading, only the actual trading process shows what Forex is about.
Anyway, it does not mean that a Mini account is just for beginners. In some cases, savvy traders can also take advantage of this type of account.
Benefits for professional traders:
- Trying new trading strategies. By dividing the capital into several parts, a trader can use a Mini account to see if a new trading strategy will work.
- Depending on the result, a trader can decide whether it is wise to trade based on such a strategy or not.
- Putting a new trading strategy into practice. Thanks to low risks, trading on a Mini Forex account can be of good use when experimenting in the market;
- Trading diversification. Trading with fractional lots allows traders to expand the list of their assets.
- Increasing control over trading
- Adjusting trading strategies for algorithmic trading
Mini forex accounts can also help traders reduce their risk in other ways. For instance, trading in mini lots can permit greater levels of diversification, because the same amount of capital can be invested across a greater number of lots.
Most forex brokers provide several options when it comes to forex accounts. One of which is called mini forex account and it is usually requires a small deposit compared to standard forex account. Mini forex account is usually considered a connecting bridge for new forex traders that had enough practicing their trading skills with demo accounts, but not yet really to open a standard account.
Mini forex deposit requirement might be small but it still allows you to trade large amounts of currency. This is done via margin and the usual margin requirement for mini forex is about 1%. It sounds too good to be true but it might turn into one of the forex trading hell unless you understand the risks.
You might think that depositing small will not get you in trouble and that is the kind of thinking that you should avoid. You should fully understand the margin terms and requirements of your forex broker. If the requirements are not listed on the site make sure to discuss it with your forex broker and get the straight answers.
Margin allows you to trade larger amount of currency then you actually have in your deposited funds. As mentioned previously margin requirement is usually 1% but it is possible to get lower requirements such as 0.5% or higher, such as 2% or 5%.
The problem with margin is that your trading positions might get partially or completely disabled in case your available margin gets below the required amount. This is called guaranteed limited risk – safety feature that prevents forex brokers from losing more money than they have in the account. I
f your margin requirement is up to 200:1 leverage, it means that you, forex trader, needs to have about half percent of the position value you hold in your trading account for each currency lot traded. This is a good enough reason for you to always check your margin balance and set stop-loss orders on every trading position. This will minimize the risk.
Mini forex is indeed an ultimate alternative to futures or stock trading, but it doesn’t eliminate the risk involved. However with a good forex trading strategy you can easily turn your $50 deposit into thousands.
If you think that mini forex is for poor you are seriously mistaken. Mini forex trading is a convenient option for forex traders. Despite small deposit you can win big, but at the same time you can lose a lot too.
When you consider trading with mini forex account make sure to understand all the sacrifices that will be required from your side! Forex brokers give traders an option of margin trading, but it definitely doesn’t come as a free gift! Investigate all the terms and rules and decide if trading small is not turning into unnecessary expenses.
If you are a beginner trader, then a micro account is the perfect option for you. As you see, it offers many benefits over other types of trading accounts, such as lower minimum deposits and the ability to use smaller lot sizes.
By using a micro account, you can learn how to trade without risking too much money and build your confidence before moving on to a standard account. So if you are ready to start trading but are unsure about which type of account is right for you, choose this one definitely.