What's the Difference of Trading Mini Lots Vs. Full-sized Lots in Forex.
In Forex trading there is something called, a Mini Account, and
it uses a different leverage calculation than a regular (100k)
account. This is, instead of trading full-size currency lots
(100,000 units), you'll trade in lots that are just 1/10 the
size (10,000 currency units), which in turn greatly reduces your
risk. Pips in a Mini Account are worth, on average, $1 instead
of the $8 to $10 value they have in a regular account. The Mini
Forex account offers up to 200:1 leverage, this means that just
a $50 margin deposit will allow you to trade lots worth roughly
$10,000 , but the smaller lot sizes, with correspondingly
smaller pip values, means that you'll be assuming less total
risk. For example, while a 20-pip loss on a 100,000 USD/JPY
position would be $200, the same loss on a 10,000 USD/JPY
position in a Mini account would amount to $20.
Here you have an overview of leverage (Margin, Account Size) on
each of the two accounts discussed above:
100K (Regular Full-sized Account) - Minimum required account
deposit = $2,000 - Recommended required account deposit = $5,000
to $10,000 - Traded in 100,000-unit currency lots - Default
Margin: set at 1% ($1,000 per lot) - Leverage = 100:1 or 50:1
(if margin is set at 2%)
Mini Account - Minimum required account deposit = $300 -
Recommended required account deposit = $2,000 - Traded in
10,000-unit currency lots - Default Margin: set at 0.5% ($50 per
mini-lot) - Leverage = 200:1
There
is no downside to trading a mini account , you will be
still enjoying all the benefits that full-size FX account
holders enjoy; including, same state-of-the art trading
software, charts, resources, and tools, etc. This mini accounts
are ideal for a new Forex trader to develop a disciplined,
rational forex trading strategy without excessively focusing on
profits and losses.
Also there is no maximum trade volume when you use a mini
account. Although the standard trade size is 10,000 units, you
are not limited to trading one lot. For instance, you can trade
10,000 units, 50,000 units or 200,000 units. This means as you
become more seasoned and build up confidence you can slowly
increase the size of your positions to maximize profits. In fact
the trade size of 10,000 units allows for more flexibility in
terms of customizing the size of your trade. The ability to
customize the size of the trade allows you to have a better risk
management. With less capital at risk in a Mini FX account, it
is easier for you to develop a disciplined trading methodology,
as well as the confidence needed to be a successful currency
trader, without the anxiety and distractions that come with
large Profit and Lose swings.
About the author:
Adrian Pablo; Forex trader
and freelance writer.
You can download a free Fibonacci trading report at his website:
http://www.1-forex.com
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Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest / trade in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading.
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