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Currency trading is a risky but potentially profitable means of earning more money in addition to your regular income. There are many ways of going about it, but if you are a beginner to currency trading, I strongly suggest starting with what is called a mini forex account. You can open a mini account with a minimum investment as small as $250, and some brokers will even allow you to open an account with a $100 minimum investment. With a mini account, you will still enjoy many of the same privileges as a regular account holder. Let's look at the difference between a mini account and a standard forex account. In a standard account, the lot or trading contract size amounts to 100,000 units of the base currency--in the case of USD, that would amount to $100,000. A mini forex account will handle only a percentage of a single lot, which means that mini account contract is one-tenth the size of a standard forex account contract. The pip values in mini forex trading are also one-tenth the normal value. Mini accounts (like standard accounts) apply leverage, meaning that for a fraction of the actual value of the currency you control you'll only be required to put up a marginal amount. For example to control $10,000 in actual currency in many cases you'd only need to post $50 to control that. This essentially provides what is known as "200 to 1" leverage. Should you be concerned that the mini account requires a high degree of leverage as compared to other forms of trading? For example, stock market day trading has a leverage ratio of 4 to 1 in a trading day, which is far lower than the leverage ratio of mini account trading is 200 to 1. But this is the standard practice in mini forex trading and traders and brokers do not see it as over-leveraging. Because forex move in very small increments, known as pips, a 1 pip move in a mini contract is only worth (on average) about $1. This is why I recommend that traders get their feet wet with mini accounts, it allows you to gain experience and develop discipline without the fear of losing sizable amounts of money. A mini forex account is a great choice for traders who want to invest $10,000 or less in currency trading.
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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