Forex Mini Account

The forex mini account is a great way to dip your toe in the forex waters without high risk. With a forex mini account you can not only start with deposits as small as U.S.$50 (as with eToro) or U.S.$100 (as with FOREXYARD), but you can also trade smaller contract sizes.

A trade size of 10,000 units is considered mini, and that's the minimum offered by both eToro and FOREXYARD. There are some brokers whose forex mini accounts offer minimum deposits of one dollar and minimum trades of one unit, but you have to be suspicious of those as they are not realistic.

For comparison purposes, you should know that a "standard lot" is 100,000, so a forex mini account lets you work with contracts a tenth of that size. That's important when you are just starting out in foreign currency trading.

When considering a forex mini account, you need to also look at the major spreads. In forex trading, the "spread" is simply the difference between the price at which you buy (the ask price) and the price at which you sell (the bid price).

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Spreads are expressed in "pips" (percentage in points). Here's an example of how it works:

If you are looking at a currency pair of Euros and U.S. Dollars (EUR/USD), you might receive a quote of 1.2226/9. The difference between the last digits is 3 pips, and that is said to be the spread. The idea in forex trading is to accumulate pips in your account.

Here's the monetary difference between a standard trade and a mini account trade. Let's say EUR/USD is quoted at 1.5568 and it moves to 1.5569. That means its value has increased by 1 pip. The value of that 1 pip depends on the size of the lot being traded. So trading a standard lot of 100,000, a 1-pip move would increase the value of your trade by $10, while the same move with a forex mini account would give you a $1 increase in the value of your trade.

To make money in the forex market, you need to trade mostly in pairs with low spreads. At the beginning of your forex trading career, especially if you are using a forex mini account, you'll want to stay well away from wider spreads.

It can be a bit tricky to establish spread information for brokers. Some will publish very low spreads, but they don't tell you these lower spreads may be rare and short-lived.

In choosing a forex mini account, also look at the leverage ratios. Because fluctuations in currency prices can be only fractions of a cent, leverage is a necessity. Leverage is quoted by comparing the capital available for trading and the capital in your account. With your leverage ratio is 250:1, that means for every dollar in your trading account you have $250 worth of trading power.

While FOREXYARD offers maximum leverage of 200:1, eToro's maximum leverage is 400:1.

When you hold a forex mini account, you should have access to the same materials as regular account holder. That includes such tools as forex trading charts, forex trading platforms and customer support. Make sure this is the case before you sign up with a broker for your forex mini account.

It's important to note that while forex mini accounts let you start very cautiously with minimum risk, it's when you get into larger accounts, larger trades and higher leverage that you'll make the really big money. However, as we all know, higher returns come with higher risks, and that is certainly true in the forex market. Use your forex mini account for many trades and  be sure you are truly ready for the risk before you move up.

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