Mini Accounts: A Great Way to Get Your Start in Currency Trading

By: Ray Chong

Currency trading is a risky but potentially profitable means of earning more money in addition to your regular income. There are many ways of going about it, but if you are a beginner to currency trading, I strongly suggest starting with what is called a mini forex account. You can open a mini account with a minimum investment as small as $250, and some brokers will even allow you to open an account with a $100 minimum investment. With a mini account, you will still enjoy many of the same privileges as a regular account holder.

A mini account and a regular forex account differ in a few ways. A regular forex account trades in 100,000 units, while a mini account trades only a tenth of that size, or 10,000 units per lot. In other words the mini account deals in one tenth the size of the regular account. This allows you to risk a tenth of what you would be risking in the regular account.

Mini accounts (like standard accounts) apply leverage, meaning that for a fraction of the actual value of the currency you control you'll only be required to put up a marginal amount. For example to control $10,000 in actual currency in many cases you'd only need to post $50 to control that. This essentially provides what is known as "200 to 1" leverage.

Should you be concerned that the mini account requires a high degree of leverage as compared to other forms of trading? For example, stock market day trading has a leverage ratio of 4 to 1 in a trading day, which is far lower than the leverage ratio of mini account trading is 200 to 1. But this is the standard practice in mini forex trading and traders and brokers do not see it as over-leveraging.

When you look at what happens in mini forex trading, you will find that the trader’s risk is offset by smaller amounts of potential losses. An average loss in mini account trading is one-tenth the amount that would be lost in an equivalent trade on a standard forex account. That makes it easier for mini forex traders to follow a disciplined trading strategy, since a trader normally finds it simpler to let go of a small loss, whereas a greater loss may prompt an investor to hold on longer than one should to a declining currency. The high leverage in mini forex trading also gives an investor more options and trading strategies in currency trading.

A mini forex account is the recommended investment vehicle for traders who want to invest $10,000 or less in currency trading.

Article Source: http://www.find-investment-advice.com

Ray Chong is a trader and author of 2 successful trading courses. Visit his website to discover how to never miss out on a major market move ever again - www.tradinggap.com

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