Mini Forex accounts are usually opened by traders who are new to the Forex market and have a limited amount of capital to invest. A Forex mini account can be opened with as little as $300, whereas a standard account needs to be opened with a minimum of $2,000.
Mini Account Contract Sizes In a mini account, the lot or contract sizes that are traded are 10,000 units of currency, whereas for a standard Forex account the lot sizes are 100,000 units of currency; in other words, the mini Forex contract is 1/10th the size of the standard contracts. The smaller trade size greatly reduces the risk associated with currency trading.
What are the advantages of a Forex mini account? Many of the same benefits are available with a mini Forex account, as are available with a standard Forex account, such as 24hr trading 6 days a week, 200:1 leverage and small deposit requirements that allow for control of $10,000 worth of currency. Although the FXDD Mini account provides as much leverage as a regular account, clients have the opportunity to take smaller size positions with less total risk.
How can you trade 10,000 worth of a currency with only $300? The answer is because of "Leverage”. Leverage allows you to trade more of a given commodity (stocks, currency, futures, etc.) than you have money in your account to do. With a mini account, the margin deposit requirement per $10,000 lot traded is $50. That means that the leverage is 200 to 1 (10,000 divided by 50 is 200). Thus, with $300 you could trade a total of 6 mini lots. The superior leverage found in mini Forex accounts provide traders with a greater degree of flexibility in the implementation and execution of different trading strategies while minimizing overall risk.
Mini Forex trading example Traders make money in the Forex market by collecting Pips (Price Interest Points). If you are trading currencies with a standard account and set a 25-pip profit limit, this is equivalent to a $250 gain ($10 a pip). In a Forex mini account, this is equivalent to $25 because a mini lot is 1/10th the value of a standard contract ($1 a pip). Consequently, losses are controlled and kept minimal at a $1 per pip with the use of stop loss orders. As a result, trading mini lots gives the mini account trader more flexibility in customizing the size of his trades.
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