Forex Mini
Accounts
What are
the Advantages of a Forex Mini Account?
Many
. With a mini account, you will enjoy many of the same benefits as with
a regular forex account, but a lower initial investment, and lower risk
per trade. Here are some reasons why you should consider a mini account
with Wealth Builders FX
- Free
trading platform through FXCM, small spread
- Less Risk per trade: Lower initial
investment- As low as $300, 1 pip = 1 dollar
- Small Pip Spreads- 3 on the EUR/USD
- *100:1
Leverage
*Without proper risk management, this high degree of leverage can lead
to large losses as well as gains.
Mini
Account Contract sizes
In a mini account ,
the lot or contract sizes that are traded are 10,000 of the base
currency, whereas for a regular forex account, the lot sizes are
100,000; in other words, the mini forex contract is 1/10th the size of
the standard contracts.
How can
you trade $10,000 worth of a currency with only $300 in a Mini Account?
The answer is
because of *"leverage"
Leverage allows you to trade more of a given commodity (stocks,
currency, futures, etc.) than you have money in your account to do.
With a mini account, the margin deposit requirement per $10,000 lot
traded is $50. That means that the leverage is 200 to 1 (10,000
divided by 50 is 200 ). Thus, with $250 you could trade a maximum of 5
mini lots, with $500 a maximum of 10, with $1000 a maximum of 20 , etc.
This leverage is 50 times greater than for stocks (day trading stocks
provides a 4 to 1 intraday leverage for traders that have $25,000
or more in an account by U.S. law). Using a high degree of leverage is
not always appropriate, but at least the superior leverage found in
mini forex accounts provides the trader with a greater degree of
flexibility in the implementation and execution of different trading
strategies.
*Without proper risk management, this high degree of leverage can lead
to large losses as well as gains.
Mini
Forex Trading is great for Accounts under $10,000
Traders
that want to trade with less than $10,000 are better off opening a mini
forex account. This will
not only give a trader more flexibility in the implementation of
different strategies, it will also give him more staying power
in the forex market since he could take advantage of
multiple trades without over-leveraging his trading account.
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