Forex Mini Accounts

What do we mean by a forex mini account? A forex mini account is an account that was specially designed for the needs of forex traders with small trading capital, allowing them to participate in the forex market by trading smaller contract sizes than the regular standard account.

What are the features of a forex mini account? We can discuss the features under the following headings:

a)    Capital requirements

b)    Contract sizes

c)     Bonuses and benefits

d)    Platform types

e)    Margin Requirements and leverage

Alpari Mini Account

Alpari Mini Account

1)    Capital Requirements

Forex mini accounts are just as the name implies: when it comes to account capital requirements, they are indeed “mini” accounts. Mini accounts require capital from as low as $50 to an amount that does not usually exceed $300 to open an account. This makes it easy for those who cannot afford more capital but want to trade forex to be able to do so.

The forex mini account goes by several names. It is also called a micro account, a bronze account or a basic account, depending on the trading platform or broker used by the trader.

2) Contract Sizes

Obviously, having such small capital in an account will put limitations on the size of positions that the trader can control. So forex mini accounts usually come with an upper limit or a ceiling on the lot size that the trader can apply to a trade. Usually this is restricted to 1 standard lot. However, forex mini account traders can trade mini lots and even micro lots on their accounts, which translate to being able to hold position sizes of between $1,000 and $10,000 per contract.

3) Bonuses and Trader Benefits

Due to the small nature of the account size of traders with forex mini accounts, they usually do not receive bonuses from brokers. Even when they do, these bonuses are very small. Forex mini account bonuses rarely exceed 25% of the account size.

4) Platform Types

The only kind of trading platforms that are used by forex mini account holders are those connected to the broker’s dealing desk. As a rule in maintaining liquidity in the market, the only way forex mini account holders can participate is when their broker acquires positions in large amounts so as to be able to maintain the required liquidity in the forex market, and then chop up these positions for allocation to the forex mini account holders in smaller sizes according to their orders. Forex mini account holders cannot get access to ECN trading platforms because their position sizes are too small to maintain the required liquidity in the forex market.

5) Margin and Leverage Requirements

The leverage requirement for traders with forex mini accounts is low. Usually, such traders can get a leverage of up to 1:500. This enables the traders to get the required trade leverage for their position sizes to be worth the trade in the forex market.

Advantages and Disadvantages of Forex Mini Accounts

Forex mini accounts are advantageous in that they allow a lower entry bar for those who do not have much money to trade but still want to benefit in some way from the forex market. The forex mini account also serves as a good training ground for beginners, allowing them to test the waters of the live forex market conditions without risking so much of their own money. To further buttress this fact, there are even brokers that allow no-deposit bonus mini accounts where between $20 and $100 is given to the trader by the broker for live trading. This is far better than any demo trading account as it mirrors exactly the live trading conditions that traders will encounter.

Despite the advantages, there are also pitfalls with using the forex mini account. It is not easier to trade a forex mini account than a larger account, and therefore when a trader is trading an account that can only guarantee a few dollars at a time in profits, there is a situation where any profits made are never commiserate with the work put in by the trader. Furthermore, the leverage provided (1:500) makes it very easy for a careless trader to lose all the money in the account.

Conclusion

Forex mini accounts are a good way to start trading forex. Even if the trader can afford hundreds of thousands of dollars, it is better to start small. Guys like Bruce Kovner, who blew his first $3000 trading money in a single trade, will advise that risk management is the number one lesson all forex traders should learn, and a forex mini account is the appropriate tool for such a lesson.

Adam

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Adam is an experienced financial trader who writes about Forex trading, binary options, technical analysis and more.

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