Aside from forex trading, the word mini means something small and limited compared to others of the same type. This made me ask, is mini forex designed only for those who cannot afford to trade large? Is mini forex less dangerous when it comes to risking?
Most forex brokers provide several options when it comes to forex accounts. One of which is called mini forex account and it is usually requires a small deposit compared to standard forex account. Mini forex account is usually considered a connecting bridge for new forex traders that had enough practicing their trading skills with demo accounts, but not yet really to open a standard account.
Mini forex deposit requirement might be small but it still allows you to trade large amounts of currency. This is done via margin and the usual margin requirement for mini forex is about 1%. It sounds too good to be true but it might turn into one of the forex trading hell unless you understand the risks.
You might think that depositing small will not get you in trouble and that is the kind of thinking that you should avoid. You should fully understand the margin terms and requirements of your forex broker. If the requirements are not listed on the site make sure to discuss it with your forex broker and get the straight answers.
Margin allows you to trade larger amount of currency then you actually have in your deposited funds. As mentioned previously margin requirement is usually 1% but it is possible to get lower requirements such as 0.5% or higher, such as 2% or 5%.
The problem with margin is that your trading positions might get partially or completely disabled in case your available margin gets below the required amount. This is called guaranteed limited risk - safety feature that prevents forex brokers from losing more money than they have in the account. I
f your margin requirement is up to 200:1 leverage, it means that you, forex trader, needs to have about half percent of the position value you hold in your trading account for each currency lot traded. This is a good enough reason for you to always check your margin balance and set stop-loss orders on every trading position. This will minimize the risk.
Mini forex is indeed an ultimate alternative to futures or stock trading, but it doesn’t eliminate the risk involved. However with a good forex trading strategy you can easily turn your $50 deposit into thousands.
If you think that mini forex is for poor you are seriously mistaken. Mini forex trading is a convenient option for forex traders. Despite small deposit you can win big, but at the same time you can lose a lot too.
When you consider trading with mini forex account make sure to understand all the sacrifices that will be required from your side! Forex brokers give traders an option of margin trading, but it definitely doesn’t come as a free gift! Investigate all the terms and rules and decide if trading small is not turning into unnecessary expenses.