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Like anything in life, forex trading involves risk, but can be extremely lucrative. The key is to learn how to manage the risk, and one of the best ways is by starting small with a "mini" forex account The great thing about mini forex accounts is that they can be opened with as little as $250 and you can gain the experience and skills with very little risk. A mini account and a regular forex account differ in a few ways. A regular forex account trades in 100,000 units, while a mini account trades only a tenth of that size, or 10,000 units per lot. In other words the mini account deals in one tenth the size of the regular account. This allows you to risk a tenth of what you would be risking in the regular account. Mini account trading does involve engaging in marginal trading. That means that you are making use of leverage, or in other words, borrowing money to be able to perform a trade without having to invest the full amount required for a single lot. The investment that you pay for out of your own pocket is called a marginal lot. For a mini account, the marginal lot for every $10,000 lot is $50, which is a 200 to 1 leverage. On starting a mini account with a minimum of $250, you are trading five mini lots with your investment. This level of of leverage appears quite high compared to other forms of trading, like stock day trading that only applies leverage of 4 to 1, But don't let the numbers scare you. When you look at what happens in mini forex trading, you will find that the trader’s risk is offset by smaller amounts of potential losses. An average loss in mini account trading is one-tenth the amount that would be lost in an equivalent trade on a standard forex account. That makes it easier for mini forex traders to follow a disciplined trading strategy, since a trader normally finds it simpler to let go of a small loss, whereas a greater loss may prompt an investor to hold on longer than one should to a declining currency. The high leverage in mini forex trading also gives an investor more options and trading strategies in currency trading. No matter what market you plan to eventually trade, if you're new to trading check out what mini account have to offer.
Article Source: http://www.rightarticle.com
Ray Chong is a trader and educator who advocates simplicity and logic. Visit his website to learn the exact technique that caught the 6,310 pip move in the USD/CAD starting in 2003 - www.tradinggap.com
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