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Article Series:
Learn Forex Trading / Currency Trading Tips
If
You Are New To Forex, Choose Mini Forex Trading
If you are new to forex or have only a small
amount of capital available right now, mini forex trading could
be the way to go for you. It allows you to trade with real
money while limiting your risk to a relatively small amount.
Generally the lot size of trades for a mini account is only
one-tenth of the lot size for a standard account with the same
broker.
Mini Forex Trading Or Demo?
Somebody starting out in forex has several options:
1.
Start out right away with live trading in a standard brokerage
account, investing from $1,000 to $5,000. This is very
risky for a beginner and is not recommended.
2. Begin with live trading in a mini forex account. Generally
you need $250 for these accounts but you may be able to find
brokers who will let you start with even less.
3. Start out with a demo account where you are picking up
trading skills without investing any real money at all, then
when you are consistently making profits, switch over to either
a mini account or full brokerage account depending on your
capital and your strategy.
Advantages Of A Mini Forex Trading Account
Most people choose option 3, the demo account. They feel much
safer using 'toy money' online for several days, weeks or months.
A demo account also gives you the opportunity to try out the
various different strategies that you are probably reading
about.
However there can be problems with running a demo account
for too long. Some forex traders and trainers say that it lulls
you into a false sense of security. It is much easier to take
risks when there is no real cash involved, and you will be
practicing with strategies that you may be uncomfortable using
in real life trading.
So what can happen is that the demo account teaches you to
make profits using medium to high risk strategies, but when
you are faced with a real money situation you may lose your
nerve. This usually results in poor decisions made on the spur
of the moment and 'strategy hopping' where you are constantly
switching from one plan to another. Losses are almost inevitable
in this situation.
For this reason, some experts recommend starting with a mini
account and using real money almost from the get-go. You would
only use a demo account for a small number of trades to familiarize
yourself with the technical side of operating your account
and making trades. In this way you are likely to learn strategies
that can work for you in the long term.
Disadvantages Of A Mini Trading Account When you are trading small amounts, you must expect to pay
more in percentage terms to the broker. This eats into your
gains. In the long term this can have a massive effect on your
results and can make the all-important difference between profit
and loss. Therefore, most people operating a mini account will
be aiming to switch to higher value trades as soon as they
have the capital to do so.
However you choose to start, you will need to accept that
forex trading is high risk by its very nature, like all forms
of investment that offer the possibility of large gains in
a short time. You should only invest money that you are prepared
to lose if things go against you.
Starting out with a mini account can be a great way for someone
who is new to forex to pick up the techniques for real. Mini
forex trading could be the best way to find out for sure whether
foreign exchange trading is right for you.
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: 2009
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