Could mini forex trading be a significant advantage to the new forex trader? While it could be considered a viable trading medium in and of itself, it also offers the aspiring trader a medium through which he/she can test his/her trading strategy and system.
Mini forex trading is essentially any trading within the foreign exchange which utilizes micro lots of typically 1000 units. This type of account can range from a USD$300 deposit all the way down to USD$25. It involves smaller margins but typically much higher leverage. While the amount of loss is typically small because of the small investments involved, it is also more difficult to turn a significant profit without braving the risks associated with high leverage trading.
Since this type of account relies on lots of 1000 units, this means that even with a USD$300 deposit you will already be leveraged 3 to 1 on a single lot. While this does not seem too risky at face value, when you use techniques like multiple entries, the leverage quickly adds up to a tremendously high level, many times in excess of 50 to 1. While the high leverage allows the trader to make significant profit from a small amount of capital, it also makes trading much riskier. In other words, for everyone who actually makes money, there are probably more than 20 who lose.
One excellent advantage mini forex trading represents for a new trader is the opportunity to feel the market with real money without too much capital at risk. Opening a mini account is a great way to get accustomed with how the market works and how your own psychology changes when risking real capital.
While this type of account allows almost anyone to get their hands into the foreign exchange, it is highly risky and not necessarily for everyone. If you would like to test a new broker, opening a mini account and trading a few lots is a great way to get accustomed to their execution and slippage, if any, without risking your hard earned capital on a larger scale.
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