Forex Accounts Explained
For trading success, good money management is the key. Many traders ignore this aspect of trading at their own peril and get their account blown in a few weeks of trading. Trading discipline means using a trading system based on money management rules that limit your risk and avoid making trading decisions based on emotions.
Without sufficient capital in your account, you wont be able to make meaningful capital gains. One of the worst blunders that forex traders can make is to trade without sufficient capital. Low capital increases your chances of getting blown out too soon. This does not mean that you should have a lot of capital before you start trading. You need to have sufficient capital in your account in order to take advantage of the movements in the currency markets. Low capital will never give you that opportunity.
Many forex brokers fix the minimum amount required to open a standard account as $2000. However, it is recommended by most of the professional traders that you should start with at least $2500-5000 to get good results. A trader with limited capital is always a worried trader. He is always looking to minimize losses beyond the point of realistic trading. Never ever trade live without practicing on the demo account for a few months. First, try to double your account at least three times in a row on the demo account.
A standard account or a regular account lets you trade a $100,000 standard lot with a $1000 deposit. This account is often also called 100k account. The broker is giving you an interest free loan of $100,000. This $1000 is kept as the margin or guarantee by the broker. This is a 1% margin. Your account should have more than $1000 if you want to trade.
When you open an account with the broker, you must determine what the default margin is. You can change the account margin to whatever you feel comfortable with. If you start with a 2% margin, then it will cost you $2000 to trade one standard lot.
Many brokers offer huge leverage to the new trades. This is done to entice them to trade more. You can get a leverage of up to 400% by some brokers. Using 400% leverage means trading $400,000 with a $1000 deposit. With a small deposit you are controlling a huge amount. Be careful! You will get wiped out in a moment. Dont use more than 4% leverage while trading in the start. Too much leverage is dangerous for you.
I am not saying that leverage is bad. You need to know it is a double edged sword that can cut both ways. It can increase your ROI but at the same time it can wipe you out in case of a slight market move going against you. Its just that you need to understand and learn how to use leverage. You can only do so with practice and with practice and more experience; you can increase the level of leverage in your trading.
The mini account was developed to accommodate investors who were looking for diversification of their stocks portfolios. You can open a mini account with a deposit of $300. This small dollar requirement allows many investors to participate in the forex markets who were previously unable to do so.
On a mini account, you have different lot sizes as compared to the standard account. One lot on a mini account means $10,000. You only need $50 to control a mini lot of $10,000. A pip size on the mini account is equal to $1 instead of $10 as on a standard lot.
If you lose 100 pips on a mini account, it means losing only $100. Losing 100 pips equal $1000 on a standard lot. A mini account reduces your risk by 10%. But it also reduces the profit that you can make by 10%. Start with at least $500 on a mini account. A mini account is a great way for new traders to practice forex trading. First develop the feel of how the forex markets work. Once you become an expert, trade on a standard account. Standard lot gives you the opportunity to make good ROI. - 23210
Without sufficient capital in your account, you wont be able to make meaningful capital gains. One of the worst blunders that forex traders can make is to trade without sufficient capital. Low capital increases your chances of getting blown out too soon. This does not mean that you should have a lot of capital before you start trading. You need to have sufficient capital in your account in order to take advantage of the movements in the currency markets. Low capital will never give you that opportunity.
Many forex brokers fix the minimum amount required to open a standard account as $2000. However, it is recommended by most of the professional traders that you should start with at least $2500-5000 to get good results. A trader with limited capital is always a worried trader. He is always looking to minimize losses beyond the point of realistic trading. Never ever trade live without practicing on the demo account for a few months. First, try to double your account at least three times in a row on the demo account.
A standard account or a regular account lets you trade a $100,000 standard lot with a $1000 deposit. This account is often also called 100k account. The broker is giving you an interest free loan of $100,000. This $1000 is kept as the margin or guarantee by the broker. This is a 1% margin. Your account should have more than $1000 if you want to trade.
When you open an account with the broker, you must determine what the default margin is. You can change the account margin to whatever you feel comfortable with. If you start with a 2% margin, then it will cost you $2000 to trade one standard lot.
Many brokers offer huge leverage to the new trades. This is done to entice them to trade more. You can get a leverage of up to 400% by some brokers. Using 400% leverage means trading $400,000 with a $1000 deposit. With a small deposit you are controlling a huge amount. Be careful! You will get wiped out in a moment. Dont use more than 4% leverage while trading in the start. Too much leverage is dangerous for you.
I am not saying that leverage is bad. You need to know it is a double edged sword that can cut both ways. It can increase your ROI but at the same time it can wipe you out in case of a slight market move going against you. Its just that you need to understand and learn how to use leverage. You can only do so with practice and with practice and more experience; you can increase the level of leverage in your trading.
The mini account was developed to accommodate investors who were looking for diversification of their stocks portfolios. You can open a mini account with a deposit of $300. This small dollar requirement allows many investors to participate in the forex markets who were previously unable to do so.
On a mini account, you have different lot sizes as compared to the standard account. One lot on a mini account means $10,000. You only need $50 to control a mini lot of $10,000. A pip size on the mini account is equal to $1 instead of $10 as on a standard lot.
If you lose 100 pips on a mini account, it means losing only $100. Losing 100 pips equal $1000 on a standard lot. A mini account reduces your risk by 10%. But it also reduces the profit that you can make by 10%. Start with at least $500 on a mini account. A mini account is a great way for new traders to practice forex trading. First develop the feel of how the forex markets work. Once you become an expert, trade on a standard account. Standard lot gives you the opportunity to make good ROI. - 23210
About the Author:
Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading and swing trading stocks and currencies. Discover A Revolutionary New Forex Robot. Develop your own Forex Trading System.
posted by X - Men @ 12:30 AM
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