Forex Mini Account Trading Explained

Forex mini accounts are a great deal for those just getting started in forex trading. To start right out with a standard account you would have to be very confident or very rich if you are a retail trader (i.e. somebody trading on their own account from home). With a mini account you can get started without risking so much money which makes it a very attractive option for many traders.

Mini forex trading accounts generally allow 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 using 100 times leverage then you need $100 to control $10,000 in your mini account or $1,000 to control $100,000 for a standard account.

For most people starting out, $100 or 100 units of other currency per trade is enough. That’s what makes the mini trading account so attractive.

Pips are units in which you will measure your profits, losses and costs (the spread). The pip size in a mini account is usually smaller than a standard account. A common standard pip size is $10 and mini pip size is $1 but their dollar value can vary depending on the currency pair that you are trading, the lot size and other conventions of your broker.

Some brokers are now quoting prices to 5 decimal places which technically would make one pip 0.00001 of the quoted price, but we will continue to use the standard 4 decimal place pip for this example.

So if you have a standard forex account you can expect to put up $1,000 on each trade, be involved in trading lots of $100,000 and measure your profits in $10 units.

With a forex mini account you can expect to be involved in trading lots of $10,000 with $100 committed on each trade and measure your profits in $1 units.

Of course you can set stop losses so that you don’t have to risk all of the funds that you have committed to the trade. But your losses will be measured in terms of pips and these too will be ten times more in the standard account.

If you are successful and your fund grows, you may want to move up to trading greater sums. By trading more than one lot at a time, you can still do this in your mini account. This has the advantage of still giving you the ability for fine control of your stops because your pip size is still just $1.

The forex mini account is a development that has opened up the market to people who have the technology but not the money for standard currency trading investment. The standard account used to be all that was available before so many people had powerful home computers and high speed internet connections that made it possible for the ordinary person to trade from home.

You could look at forex micro accounts if you want to risk even less of your money. Forex micro accounts allow you to make even smaller trades. Be aware though that the spread is often a little high and with a micro account you might find it difficule to profit. Until your confidence builds it may be better to use a demo account and then open a forex mini account for real trading.

I’m sure you probably have a lot more questions about forex mini accounts…