Consider to Trade Forex Mini Lots if You are New to Forex

Everyone who starts trading currencies in Forex market first considers to try himself on a mini account. The days when only rich people were trading currencies are long gone. Now almost anyone can start trading on a mini Forex account. There are many brokers that offer mini accounts to trade with a small deposit.

A regular lot is 100,000 of units of currency. That’s a large amount of money you need to trade. However some brokers have an option of mini lots that consist of 10,000 units of currency.

Brokers give opportunity to trade with leverage. It’s common to see them to give leverage as high as 100. With leverage you don’t even need to have that much money in your account to trade. For mini lot of the size $10,000 you need only $100. To control a regular lot you need $1000.

That’s the basic reason why Forex trading is so popular. Most people can commit $100 or so to open a mini account and start trading currencies.

The value of one price point or pip is also smaller. If the value of price point for the regular lot is $10 then the pip value for a mini account is just $1 for the pairs where US dollar is a base currency. For other pairs the pip value is close to that number but varies with the price.

Let’s say you have a mini account and you trade one mini lot. In other words you use $100 to buy or sell 10,000 units of currency pair. In this case you are risking $1 or 1% per pip.

Therefore you always need to use a stop loss. Otherwise a move of 100 pips against your position will wipe out your investment of $100. So allowing price to move 20 or 30 pips against your account will mean setting your stop loss at that level.

Once you learn to trade with consistent profit you may want to move to trade trade regular lot size. However depending on your broker you can do the same on a mini account trading 10 mini lots. The profit potential will be as if you were trading using a regular account. However this option can give you much more flexibility in terms of taking profit and placing stop losses since you can take partial profit and reduce your risk.

Not so long ago regular accounts with the standard lot sizes were available to wealthy people who could risk large amounts of money. Mini account is a development in Forex market that allows a regular people to try themselves in trading currencies.

A few year ago some brokers started to offer even micro account. It gives you a micro lot size 100 times smaller than a standard lot. No matter which account you chose to start your trading you need train yourself on a demo account.