In forex trading , there are several different account types that you can open with a forex broker. You can open a standard forex trading account, a micro forex trading account, or a mini forex trading account.
Some time ago, forex trading was only available to very special investors that had close relationships with banks and it was also available to the banks themselves. Forex trading was like an exclusive club. As such, when forex trading went retail the "standard" trading size was around 100,000 US Dollars. This might have been pocket change for the high end investors that were the original traders in the forex market, but it's a far cry from the type of money that the average investor has.
To solve this problem, forex brokers did two things. The first of those items was that they allowed traders to trade with leverage, or trade on margin. In fact, they allowed traders to trade with so much margin, that traders needed only around $2000 to trade a standard sized lot. This is much better than needing 100,000 to start making trades but it still wasn't quite enough to make the market easily accessible to beginning investors. The second thing that forex brokers did to allow forex traders easier access to the currency markets was they created an account type called a forex mini account. With a mini account, traders were allowed to trade lots of $10,000, just a mere 10th of the standard account trade size. With these two items combined, traders could now enter the market feasibly for under $500.
So, in essence a mini account is an account that allows much smaller trades and easier diversification. This is a much better set up for someone that is new to forex trading, has limited capital, and limited experience.
Although you can easily open a mini forex account with just a few hundred dollars, for the sake of forex risk management, you should open your account with no less than $1000. Even a forex professional would have trouble with success starting such a low initial investment. Too much risk is required to make money if you have a low starting capital. You may get lucky, but you may just blow up your account and have to start over several times. Instead of going through that, start off with a higher balance, even if it means waiting for a bit before opening your forex trading account. Most forex brokers offer mini accounts. Take a few different brokers for a test drive and figure out which one fits your trading personality and has decent customer service. Once you find one that works for you spend as much time practicing as possible.
Here are some basic survival suggestions:
- Trade on a demo account for at least one month before committing any real money
- Trade as small as possible at first
- Make only one trade at a time
- Keep a forex trading journal to keep track of your thought process
These things will help you get a firm foundation while you are learning and hopefully keep you from making mistakes that will make you lose your shirt. Even though you are trading on a mini account and trading for smaller amounts, it's still pretty easy to trade risky and lose money quickly. Keep your wits about you, be patient, and trade with caution.
If you're feeling ready to get started, make a list of forex brokers and start trying them out. Take your time before committing your hard earned money, follow the advice above and you have a chance of making money trading on a mini account. Good luck, and as always, email me at forextrading@aboutguide.com with any questions.