Mini Forex Account

A mini forex account is designed for those new to online trading and those with limited investment capital. Those with less than US$5,000 often favour mini accounts although regular accounts may be opened with a minimum of $2000-$5,000. The amount varies from broker to broker.

A mini forex account can be opened with a minimum of US$300-500 and this figure varies between brokers.

A mini forex account is intended to introduce traders to the excitement of forex trading while minimising risk.

• A mini forex account can be opened at anytime but many traders practice on a demo account first to test their trading strategies and techniques.
• Trading size is normally 1/10th the size of a regular account. Some brokers have smaller lot sizes. This reduces the risk associated with forex trading.
• Margin requirements differ depending on the broker. The NFA states the margin should be no less than 1% of the base currency traded. However not all brokers follow these guidelines. Some brokers offer margins as low as US$50 per lot on their minis.
• Some brokers have software in their Trade Stations that automatically calculates the required margin while others manually set the margin and vary it accordingly.

The CFTC is enforcing a 1% margin requirement for registered FCMs and their affiliates that only offer trading in the Forex Market.

The new NFA rule requires a minimum 1% margin at all time to maintain an open trade. (Note this may change from time to time so although we use 1% as the example at some stage in the future the margin maybe different. However using similar calculations one can easily calculate the new margins)Some deal stations automatically calculate this according to the formula and hence the margin requirements are continually varying.

Based on a 1% margin requirement

Example 1:

GBP/USD rate: 1.7442/1.7447

Account type: $10 000/lot

1% leverage: 10 000x0.01 (1%) =100units

With the GBP/USD, the margin required is:

1.7447 (GBP/USD) x100 (units of base currency GBP) = USD174 for each lot.

Example 2:

EUR/USD rate: 1.2326/1.2331

Account type: $10 000/lot

1% leverage: 10 000x0.01 (1%) =1000units

With the EUR/USD, the margin required is:

1.2331 (EUR/USD) x100 (units of base currency EUR) = US$123 for each lot.

• On a mini forex account where the margin is only US$50 per lot, a trader with $500 can withstand a larger market swing than a trader with a regular account with higher margins but if they have a margin call will lose more capital. A margin call occurs when the balance of the trading account falls below the required minimum balance required. The broker then closes all open trades.
• Mini forex accounts have become very popular as many stock investors are taking positions in the forex market to spread their risk.
• It pays to compare mini forex accounts at different brokers to find the best rates on overnight positions and the most competitive spreads.
• Pip values vary between the different currency pairs. Based on a US$ 10K account, a 25 pip profit on a mini account Euro trade is $25 and since this is a small amount, a mini account allows traders to focus on technical analysis instead of the profit and exit at the right point rather than take profits early. On a regular account (100K), 25 pips would give US$250 profit.

Following a Risk Management Plan

One of the essentials of trading in any investment market is establishing a risk management plan. New traders often jump into the market head first with no real pre-determined trading plan. The outcome can be disastrous in a short period time. The Forex market, just like other investment markets such as the stock market and futures market, require a trading plan that’s free of emotion and heavy on discipline. Only then can a trader’s hard earned money and valuable time translate into respectable profits.

The risk-reward ratio

The risk-reward ratio is basically the risk you’re willing to take to make a certain profit. Any risk management plan that’s worth its money has a decent risk-reward ratio of at least 1:3. What exactly does a 1:3 ratio mean? It means that for every unit of risk you take, you’ll reap three times that amount in reward. A 1:4 ratio means that for every unit of risk you take, you’ll earn four times that amount. The larger the ratio is, the greater reward you make. However, with higher risk-ratios, you’ll have to wait longer to make that trade. You might end up missing some lucrative trades in the interim, and your “ideal” trade might never show up.

Here’s how it works

Let’s say you risk 50 pips (units) to make a deal worth 100 pips. You’re risk-reward ratio is 50/100, or 1:2. If your risk management plan limits your trades of at least a 1:3 ratio, then you shouldn’t make the trade. However, if you risk 50 pips for a potential 150-pip gain (50/150 or 1:3), then it’s worth it.

What about risking more than you can make?

Some investors don’t mind risking more than they can make on a deal. Is this real good advice to follow though? If you’re a real risk taker, then take the chance. But if you’re in the market to make a real profit over the long run, then don’t do it. It is just not sound risk management planning.

Suppose you want to risk 100 pips to make a potential 50 pips. Your risk-ratio is 100:50, or 2:1. That means that you’re willing to give up more than you can make on the deal – not the best logic. True, you can make 50 pips, but you’re risking more than you can even make on the trade.

An automated Forex trading system platform provides traders an online environment to place orders 24/7, from the comfort of their home.

Forex market is a non-centralized market. There is no common market place for Forex traders and there is no so-call ‘standard’ in foreign currency exc

There is an old saying that is loosely translated to 'if I don’t help myself, who will?’ now while this isnt very elloquent, it does convey what i want to tell you.

No entrepreneurship, no success, no money making scheme, is done if you don’t have a hand in it. So don’t rely on what other people can do for you, just get it done for yourself.

Now while this rule applies to everything, it’s specifically useful regarding the forex market (foreign exchange). The forex is the biggest, most liquid market on the planet. Basically it trades currencies and is estimated that over 2 trillion dollars pass hands each day. Just to give you perspective, the new your stock exchange (also a huge endeavor), 'only' processes about 50 billion dollars a day. Get the picture?

I bet I can guess your thoughts right about now. Well, maybe not the actual thought so much as the sentiment. You want some. 2 trillion is too much to be ignored and any person with a sturdy head on their shoulders would want a piece of the action. But in order to do that, you need to know at least the minimum for forex trading.

We understand that you can’t know or operate everything; you will need porters, or advisers or just plain friends to call when you’re in a bind, but don’t you want to be the one to make the call about whets best for you? The only way you can do that is if you learn, so make sure you understand whets going on before you take even a step into the world of forex trading.

How do you start trading Forex?

Now you need to find a forex system that will help you along with your trading. You need to find the right system for you, so don’t ever tire of looking. You can find trading systems all over the market (the internet really) and they could and will help you make hundreds, if not thousands of times over any dime you pay up front.

You might think it’s difficult to get your trading system personalized or up and running in general, even if it’s standard. You might even find it hard to make a choice, but all it ever comes down to is knowledge, and that is what we are here for.

You can find the trading system for you if you just take into account 5 different pointers (that’s it, five!!) but before we get there, there are three things you have to know. So lets start there, and then we can move on to the pointers.

The first things you have to know is don’t fall into the gadget trap.

Just because it’s shiny doesn’t mean you need it. It’s actually, almost on the contrary. The simpler the system the better it will probably be for your forex needs, so stay away from the forex trading/cappuccino making/ironing/phone/camera combo. Stick to the basics and you will be fine. Another thing that should be obvious to you is that you, as your trading system, should be in the business of cutting losses and running with any profit possible.

You need a system that can identify possible profits and (ideally) instantly cut losses. This could save you a great deal of money, so don’t turn on your computer before you’re convinced that this is what your system does. The last of the three things you should know is that you need a system that can recognize long term trends. if your computer is only analyzing days when deciding to sell or buy, then you will never get more then pennies to your dollar, and that just isn’t enough when there are two trillion to be had.

Now lets get to the five must knows when it comes to getting started with the forex market. First of all, your trading system should be simple (for conviction read above). You need an extensive investment management system, but only some essential general rules. Anything more will only confuse your computer and will long term hurt your profit potential.

Secondly, don’t be happy with short term trends; go for the longer weekly based trends so that your profits will really be impressive. If you analyze what happens to the market on daily/hourly charts then it can really understand the market, and only then will you be happy you left your day job.

The third is that the best way to trade in foreign currencies is the breakout method, so ask around, find from peers and experts, and learn all about this method before you get started.

The forth thing that I want to enlighten you with today is that you need to develop a timing tool for your market entrances and exits. Watch for breaks in the market and have them sketched on your chart so that you can see what is going on in the market.

And my last parting words of wisdom? The fifth is that you should have time management become an important part of your chosen system. you need your time to yield the best results, because two trillion isn’t when you want it, its once a day, and days come and go as they please, not at your request.

So get started, there is no doubt in my mind that if you stick to what you have read here then you will be that much closer to becoming a millionaire.

Have fun!!

How does a faulty Forex dealer cheat your money?

Forex market is a non-centralized market. There is no common market place for Forex traders and there is no so-call ‘standard’ in foreign currency exchange price. Different Forex dealers offer very different deals to their customers.

As an individual FX trader, you depends solely on the dealer to make a transaction in your trades, thus picking up the right dealer is extremely crucial in your risk.

You may wonder how does a faulty dealer can cheat on your money as all investment call have to go thru your decisions.

Well, here's a typical example:

Often a bad dealer is not totally scams.

They are smart persons that trick money from traders that are not well-aware. These dealers, often known as retail market makers, will often encourage their clients to trade on margin and set stop loss orders, which allow the market makers to close out trades almost at will during busy markets at prices they have set. If the market maker does not offset the trader's position, the loss generated when a stop loss is triggered becomes the market maker's gain.

Trade prices are easily skewed one way or the other depending on the retail trader's position, which is known by the market maker.

Traders can be encouraged to take risky positions just before major economic announcements. If all else fails, the market maker can quote extreme prices (known as spiking) to trigger stop loss orders while the client is at work or asleep.

The vast majority of retail FX traders are not profitable. For those losing retail speculators, much of the funds they had on deposit will be, in some form or another, transferred to the market maker.

Pick the best Forex broker if you value your money!

As you can see, a stop loss order may not always on your side.

Be very clear on who you are dealing with in Forex trading to avoid being cheated. In case you are worry about your money being cheated by dishonest FX broker, why not check out our FX brokers recommendation section and pick a reliable broker yourself!

Understanding the risks in Forex trading

Forex: To trade, or not to trade? Many are reluctant to involve in Forex trading because of its ‘risks’. Generally speaking, there are risks everywhere in our life: Factories may malfunction, customer may not walk-in if you open a shop, stock market may crush, and if you are employed you may get fired during company downsizing. There are risks everywhere! The important issue here is how you learn and maintain your risk. So if you are considering participating in Forex market, you should learn managing the risk involved, instead of being terrified.

Picking up the right Forex dealer

One of the best methods to avoid unnecessary risks is avoid fraud dealer.

Forex is a special trading business with no centralized market. Thus, unlike regulated futures exchanges, there is no central market place for Forex buyers or sellers therefore the price offered by different Forex dealers may vary a lot. When you are trading in Forex market, you are totally relying on the dealer’s integrity for a fair deal.

Further more, you need to select a right Forex dealer to avoid scams. There may be Forex dealers that are not regulated legally and there maybe investment scams, especially on the Internet. Be very careful on who you are dealing with in Forex and always check cautiously on the investment offer.

Stop loss order

The Forex market could move against you. No one can predict with certainty which way exchange rates will go, and the Forex market is volatile. Fluctuations in the foreign exchange rate between the time you place the trade and the time you attempt to liquidate it will affect the price of your Forex contract and the potential profit and losses relating to it. To avoid losing all of your investment capital, you should have a pre-arrangement on your risk profile. A solid risk profile will limit the Forex dealer not to overtake risk that you cannot handle. For example, if you have 100,000 to invest, you can say that you are willing to risk 10,000 of that capital with the potential to gain another 100,000. This can be easily implemented by a fund manager, so your losses can be limited to 10% or 5% of invested capital.

Avoid too high margin trade

Another way to manage your risks well in Forex market is to trade without overleveraged. Forex dealers want you to trade with high leverage values as this means more spread income for them. Also, trading in high leverage may increase your profit or your losing. There are high possibilities that one lose money more than he or she can afford in margin trading.

Forex can be extraordinarily beneficial to a variety of people. It gives huge leverage rates, it gives incompatible liquidity to your money, it gives convenience to trade on the Internet, and it can definitely give you a lot of money if you trade smartly. Like any other trading business, if you are new to it, best advice you can get is to learn and practice more before you test your ‘wings’. Seminars, eBooks, Internet, papers, video courses – all these are handy to get yourself ready. You can also try out your skill on the demo account provided free. After all, Forex trades 24hours a day and there is always money to make in the market, so why not be patience until you are fully ready for it?

Diversification in Forex trading

Diversification is another way to manage risks in Forex market. Trading one currency pair will generate few entry signals. If you wish to lower your risk in Forex market, it would be better to diversify your trades between several currencies.

Try simultaneously trade on different pair of currency. Say you have capital of $1,000, instead of putting all your money to long EUR/USD, you can split the money half to long EUR/USD and GBD/USD ($500 each) as these two currencies are highly correlated and tends to move in the same directions.

Conclusion

Needless to say, knowledge is another key of handling your risks well. Before you get into Forex market, the best thing you should do is educate yourself. What drives currency price movement? How to read analysis data? How to read chart indicators? Learn detail about how currency price move and how to trade foreign currency exchange in order to avoid unnecessary risks.

You come to this article probably because of you are new to FOREX and were looking for some readings on the Internet. To be frank, Forex can be very profitable but the risk lie beneath is equally great. But what else in life does not involve risk? You can be fired from your job, factory may malfunctions, stock market may collapse, your boss may runaway with your wages, and hey! These are all risk. Learning in risk management is the key to handle your life.

Trade smartly, and gain the maximum out of Forex – good luck!

10 Tips for your success in Forex trading

1. Implement a trading plan.

“If you fail to plan, you plan to fail”. A trading plan is especially crucial in Forex trading to stay ‘in-control’ against the emotional stress in speculative situation.

Often, your emotions will blind and lead you to the negative sides: greed causes you to over-ride on a win while fear causes you to cut short in your profits. Hence, a well organized operation has to be predetermined and strictly followed.

2. Trade within your means

If you cannot afford to lose, you cannot afford to win. Losing is a not a must but it is the natural in any trading market. Trading should be always done using excess money in your savings.

Before you start to trade in Forex, we suggest you to put aside some of your income to set up your own investment funds and trade only using that funds.

3. Avoid emotion trading

If you do not have a trading plan, make one. If you have a trading plan, follows it strictly! Never ever attempt to hold your weakened position and hope the market will turn back in your favor direction. You might end up losing all your capital if you keep holding. Move on, stay within your trading plan, and admit your mistakes if things do not turn as you want.

4. Ride on a win and cut your losses

Forex trader should always ride till the market turns around whenever a profit is show; while during losing, never hesitate to admit your mistakes and exit the market. It is human nature to stay long on loses and satisfy with small profits – this is why as we mentioned earlier that a strictly followed trading plan is a must-have.

5. Love the trends

Trends are your friends. Although currency values fluctuate but from the big picture it normally goes in a steady direction. If you are not sure on certain moves, the long term trend is always your primary reference. In long run, trading with the trends improves your odds in the Forex market.

6. Stop looking for leading indicators

There aren't any in the Forex market. While some firms make a lot of money selling software that predicts the future, the reality is that if those products really worked, they wouldn't be giving the secret away.

7. Avoid trading in a thin market

Trade on popular currency pairs and avoid thin market. The lack of public participation will cause difficulties in liquidate your positions. If you are beginners, we suggest the big five: USD/EUR, USD/JPY, USD/GBD, USD/CHF, and EUR/JPY.

8. Avoid trading in too many markets

Do not confuse yourself by overtrading in too many markets especially if you are a beginner. Go for the major currency pairs and drill down your studies in it.

9. Implement a proper trading system

There is hundreds of trading systems available on line. Pick one that you are most comfortable with and stick with it. Stay organized in your trades and fully utilized stop-loss or limit functions in your trades.

10. Keep learning

The best investment is always the investment on your brain. Without a doubt, Forex trading needs much more than just a few guidelines or tips to be successful. Experience, knowledge, capital, fortitude, and even some help of luck are all crucial in one’s success in the FX market. if you lose in a trade, do not lose the experience in it. Learn from your mistakes and regain your position in the next trade.