Mini account for Forex trading – advantages and disadvantages
If you are just new to the world of Forex, you might find things a bit complicated and very fast. This is probably very intimidating, not to mention expensive! So to help you with your first foray into Forex without sacrificing your hard earned money, many brokers offer a mini Forex trading account.
A forex mini account is the same as a standard account, except that the minimum amount to open an account is much smaller and you can start an account for as little as $100 with some brokers. Most standard Forex accounts require a minimum deposit of at least $1,000, ten times that of a mini Forex trading account.
There are several disadvantages to mini Forex trading accounts. First, if you’re not careful with your money management and trading system, just one overlooked bad trade can kill your account balance pretty quickly. Stick to your system instead of looking for an attractive deal. Second, you cannot expect any significant returns too quickly from a forex mini account. On the other hand, with patience, you could build this account in time and use it to start trading larger lot sizes, which can be more profitable.
Because there’s always the possibility of failure in any kind of business venture, and because books, demos, and lectures can guide you so much, gaining hands-on experience with minimal consequences is not only imperative, but key to your bank balance. This is the help that the forex trading mini account gives you. It allows you to get your hands dirty as they say without risking your entire nest egg as you can only lose what you initially invested ie. $100.
The main drawback of any trade is that human emotion gets in the way of making sensible trades. Individuals hold on to a losing outlook longer than they should, hoping that the trend will reverse and they will win it all back. This often does not happen until the investor has already lost everything. With a mini Forex trading account, this emotional anxiety is minimized.
The dangers in a mini forex trading account are similar to a standard forex account, so even if a mini forex trader holds a losing trade longer than he should, he does not lose as much money because the amounts are much smaller. The Forex Trading Mini Account allows you to practice making smart decisions whether to buy or sell. Once you’ve mastered this art, you can continue to invest larger amounts safe in the knowledge that you won’t lose your shirt.
Another advantage of the mini account is that it can be used by people who do not want to use forex trading for a living, but rather love the excitement and competition of buying and selling. It might be fun after all, but it can be far more frustrating than enjoyable if you’re dealing with large sums of money. It’s similar to playing penny ante poker with your friends. The game doesn’t change, but the stakes are much lower and therefore the amount of risk is also lower.
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