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Who Should Trade a Mini Forex Trading Account?

by Toby Smitz

Yes, the word mini forex is still around. Here, Toby gives us some revision into the implications of trading mini accounts. Here's the article:


A mini forex trading account is designed for those who are new to forex trading or when the trading account balance is less then $10.000.


Mini forex account key points


- Only $250-$300 to open
- Up to 200:1 trade leverage
- 1 pip = $1 for EUR/USD and GBP/USD
- Smaller trade size


Mini forex account advantages


Build up confidence starting small


A trader can trade a mini forex account using 1 mini lot and building up lot size slowly when he makes profits in his account. A general rule is to trade ONLY 1 mini lot for every $1000 a trader has in account. For example, if an account is worth $5000, trader can take up to 5 mini lots.


Develop a forex trading strategy


Because on a mini forex account, pip value is $1 = 1 pip, trader can pay more attention on building a solid trading strategy without focusing on floating profit & Loss (P/L). Most traders with a small account balance trading on a standard account will tend to base trading decisions on profit &Loss and not on their trading strategy, they are emotionally too involved.


Their account balance fluctuations are so important that they even can’t think developing a proper trading strategy. Their account size is too small for the lot size they take and every small pip loss can lead to a painful loss in their trading account.


Such traders will tend to take profits (too) soon and cut losses too late because they always hope the trade will make a reverse and come back.


Consider the following example:


A trader has a $2000 trading Account.


When trading a forex standard account, a 37 pip loss will result in a $370 loss in his trading account or 18.5% of his account balance. When taking the same trade on a forex mini account, a 37 pip loss will result in a $37 loss in his trading account or 1.85 % of his account balance.


Conclusion


By starting with a Mini account- a trader loses only a small amount on every losing transaction making it easier to stick to a disciplined trading strategy, in the long rum, this will lead to much better trading results.


Toby Smitz - Daily Operations Mini Forex Trading


Article Source: http://EzineArticles.com/?expert=Toby_Smitz

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