A forex mini account is very popular for newbies to learn forex trading. It helps a lot to understand and minimizing risks because of smaller lot size. You can start trading with small amount. Another advantages is retail brokers offer more leverage to maximize capital.
Forex Mini Accounts Expose You to Mini Risks
Ever since the forex trading market has begun to use the internet as a trading platform, trading practices and procedures have been revolutionized significantly. Traditionally, an individual could only trade with the standard lot, i.e. 100,000 units of the base currency. This minimum limit was too large for many individuals to begin trading. Moreover, a large standard lot also exposes the trader to bigger risks. Thus, the concept of mini forex accounts was launched.
What are Forex Mini Accounts?
Forex mini accounts allow the individual to trade in a smaller lot of 10,000 units of the base currency. This is particularly beneficial for novice traders. A lower minimum limit directly translates into lesser risks, encouraging novice traders to experiment with the trading decisions. Thus, mini forex accounts are a great tool to learn the nuances of the currency trading market.
Benefits of Trading With Forex Mini Accounts
Let us take an example to understand the benefits of mini forex accounts in relation to risk tolerance. For instance, if you are trading in the EUR/USD pair, you might enter the trade at a value of 205.5 and set the stop order limit at 20 pips. This means that your trading will stop automatically at 205.25. If you have $1,000 in your live trading account and you are trading with a mini lot, you will face a risk of $20.
Now, according to experts, the risk factor in a currency trade should not exceed 3% of the money in your trade account. With $1,000 in your account, your maximum risk tolerance should ideally be $30. Thus, a mini account poses a satisfactory risk. On the other hand, if you were trading a standard lot, the risk factor increases to $200, i.e.30% of the trading account, which is not advisable.
Forex mini accounts are available with almost every popular forex trading broker, such as AvaFX, ForexYard, FXCM, iForex, etc. It is highly recommended that amateur traders begin their careers with a forex trading mini account.