Forex mini account or forex regular account? Just ask yourself how much money you have to risk on Forex trading. If you have, say, $10,000 or more to trade with then a regular account is probably suitable. If you have anything less then a mini account would be advisable until you have experience and profits that give you the confidence to open a regular account.
So what exactly is the difference between a Forex mini account and a regular account? The detail will vary slightly from one broker to another, but basically the main differences reflect the fact that a mini account is the same as a regular account, except that it’s on a smaller scale.
Typically, the minimum amount you need to open a regular account is around $2,000 to $2,500. A mini account can normally be opened with just $250. Some brokers will accept less, and one site I looked at recently only required $25. This brings forex trading within the reach of people with only a small amount of money to risk.
A regular account will trade currency in lots of 100,000. This is rather confusing but you don’t have to know exactly what this means. All you need to know is this. Most currencies are quoted to 4 decimal points. For example, as I write, the British pound (GBP) is being quoted at 1.5095 against the US dollar (USD). So if you buy the GBP against the USD right now at $5 a point, then if the price goes up to 1.5105 you’ll have made 10 points (also known as pips) of profit, which at $5 a point is $50.
A mini account trades in lots of 10,000. This means that in the above example you would only have traded at $0.50 a point, and therefore have made only $5. The minimum amount to trade on a regular account is $1 a point, and on a mini account is $0.10 a point.
If the trade had gone the other way, and the pound had gone down to $1.5090 then you would be down 5 points, which at $5 a point on a regular account would have been $25 and at $0.50 a point on a mini account would have been only $2.50.
The usefulness of mini accounts is that they protect you from losing a lot of money, so you can start with a small amount. Of course, your winnings are also smaller, but the idea is that once you become more proficient you can move up to a regular account and trade with larger amounts.
The above examples ignore the “spread”, which is how the brokers make their money (if they are not directly betting against you, which sometimes happens). But they illustrate the essential differences.
Another difference in these two types of account is the amount of leverage, though this can vary from broker to broker. Often you’ll find that the leverage allowed on a mini account is up to twice the amount allowed on a regular account, which rather defeats the objective of the mini account, i.e. to keep losses down. This means that you can risk in some cases 400 times the amount of money in your account. Hardly something that you as a new, inexperienced trader would want to do.
If you’ve had success in your demo account, which you should have opened first to practice trading without risking real money, then you may want to start trading with real money in a forex mini account.
Philip Gegan
Join me in making regular profits, using only the best Forex robots and trading software. Just visit the Home Page of Online Financial Trading.
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