Begin Trading FOREX with Mini Lots to Minimize Risk
Traders that are new to the FOREX markets should follow certain steps
to minimize their risk until they become confident, knowledgeable FOREX traders.
Step 1. Learn everything you can about the FOREX markets. Reading through all of the articles on this website can be an important step in that direction.
Step 2. Open a demo account so that you can begin trading FOREX to gain experience without risking your own money. Trade until you can consistently make profits with play money.
Step 3. Open a Mini account so that you can begin trading FOREX with minimal risk while putting some of your own money at stake. Trade until you can consistently make profits with small money plays.
A Mini Account provides less risk and a smaller deposit than a full account.
Instead of trading full-size currency lots of 100,000 units, a mini lot is just 10,000 units, 1/10 the size and 1/10 the risk. Pips in a Mini Account are worth, on average, $1 instead
of the $8 to $10 value they have in a regular account. The Mini
Forex account offers up to 200:1 leverage, this means that just
a $50 margin deposit will allow you to trade lots worth roughly
$10,000. The smaller lot sizes, with correspondingly
smaller pip values, means that you'll be assuming less total
risk. For example, while a 20-pip loss on a 100,000 USD/JPY
position would be $200, the same loss on a 10,000 USD/JPY
position in a Mini account would be only $20.
A Mini account also lets you start with a smaller account deposit. You can start with as little as $300, although $2,000 would be a recommended deposit.
The default margin for a Mini Account is 0.5% or $50 per mini-lot, providing 200:1 leverage.
A Mini account can still provide all of the benefits of a full-size FX account such as state-of-the art trading software, charts, resources, and tools, etc. Mini accounts are ideal for a new Forex trader to develop a disciplined, rational forex trading strategy without excessively focusing on profits and losses.
As you become more experienced at trading with your own money, you can trade multiple mini-lots.
There is no maximum trade volume when you use a mini
account. Although the standard trade size is 10,000 units, you can also trade
50,000 units or 200,000 units. As you
gain experience and build up your confidence you can radually
increase the size of your positions to maximize your profits.
With less capital at risk in a Mini FX account, it
is easier for you to develop a disciplined trading methodology,
as well as the confidence needed to be a successful currency
trader.
When you are analyzing potential option positions, it
helps to have a computer program like Option-Aid that
swiftly calculates volatility impacts, probabilities,
statistics, and other parameters of interest. These
programs can pay for themselves with the first trade that
they help you with.
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