Trading may be the great way to have direct income. It gives you a good profit just by predicting about market correctly. But sometimes it is good to understand all the dynamics of the trading forex. So for this some forex brokers offers forex mini account.
What is Forex Mini Account?
In order to know about forex mini account, you first have to know about the difference between a standard and mini account. Basically, while on a Standard forex accounts users can open a position size of 100,000 base units (meaning $10 per pip), a mini account lets you open a position at a size of 10,000 base units ($1 per pip), and micro forex account allows you to open a position size of 1,000 base unit trades ($0.1 per pip).
In simple words, forex allows you to trade in small size positions. This helps you to practice and know high and lows of the market. Mini account is not only for new ones but the experienced can also test their strategies.
Forex Mini Account Lot Size
Users can trade up to lot size of 10,000 units, which is one-tenth of the position size of a standard lot account of 100,000 units. This means that when you open a trade on a forex mini account, every pip is worth $1 in comparison to $10 on a Standard account.
Account Pips
Before entering the world of trading, you have to know about profit or loss in the movement of one Pip. Basically brokers offer three types of account as you know, mini, micro and standard. Each version is slightly different. The main difference is of Pips. If you trade on the currency pair in standard the of each pip movement is $10. Whereas, in mini it is $1 and in micro $0.1.
Use of Leverage
Forex brokers allow the mini account users to use leverage for their trading. Which means that mini account holders have more capital than they deposited. You can borrow more capital from the brokage funds.
But with the benefit to get extra money to trade, it also have higher risk with each movement of pips.
Benefits of Mini Forex Account
A Low Minimum Deposit
In most cases, the deposit amount required to open a mini account is significantly lower than a Standard account and typically ranges between $100-$500. This makes a mini forex trading experience ideal for beginner investors or for experienced traders that want to test the broker and the platform before making a larger investment.
A Great Way to Test Trading Strategies
Clearly, if you want to test various trading strategies without risking too much money, a forex mini account is the best solution. As opposed to a demo account, trading with real money has a huge impact on your confidence and allows you to control your emotions. Therefore, it is an effective way to establish a risk management strategy before you add more money to your live account and increase the size of the positions.
Diversification
Another important factor to consider when using a mini account is the ability to diversify your trading. Instead of opening one trade on a Standard account that requires 1 lot for a trade, you can open 10 positions at a size of 0.01 forex mini lot.
Conclusion
To sum up, for some people trading with one of the best mini account is a must-have either because they don’t have enough funds or they just want to test the platform before adding more funds to their account balance. Further, some people prefer trading small size positions of forex mini lots as it removes the tension of losing a large amount of money, and thus, provide more rational decision-making.