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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. 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. 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. A mini forex account is the recommended investment choice for traders who want to invest $10,000 or less in currency trading.
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Ray Chong is a trader and educator who advocates simplicity and logic. Visit his website to discover a trading technique that people say is actually better than a stuff they've paid for - www.tradinggap.com
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