FOREX: Pros and Cons of Mini Trading Accounts

There are several different types of Forex accounts that you could potentially open with a broker. One type of account that you can open is the mini trading account. Here are some of the pros and cons associated with mini Forex accounts.

Pros

One of the big advantages of opening a mini trading account is that you will be able to start out with a small amount of money. In most cases, you are only going to have to invest a few hundred dollars to get started. When compared to other trading accounts such as a standard account, you would have to come up with approximately $2000 to get started. Some brokers even require you to start your account with $10,000. The mini account allows you to get started with a minimum investment and start trying out your trading strategies immediately.

If you are still trying to learn how to trade Forex, this type of account can be beneficial. Since you are only risking a few hundred dollars, there is not as much chance of you losing substantial amounts of money. Therefore, if you are unsure of your ability to trade the market, you can use this type of account to see what Forex trading is really like. While you can test the market with a demo account, trading with a live account is different. People trade differently with real money and a mini account will allow you to trade like you are going to when you invest larger amounts of money.

Cons

With this type of account, you are getting the benefit of having lower risk. At the same time, you are also going to bring in lower amounts of profit. Since you are only risking small amount of money, your expectations of returns should be tempered. This type of account is mainly for people that are just getting started or do not want to risk a large amount of money. If you are planning on becoming a professional Forex trader or making a significant amount of money, you will want to make sure that you eventually open a standard trading account.

Another potential disadvantage of this type of account is that you are not going to be sufficiently funded. In the Forex market, many experts recommend that you should not ever start an account with only a few hundred dollars. The market can move very quickly and you need to be able to have a large enough account that you can withstand some of this movement. If your account is too small, you will not be able to only risk between 1 and 3% of your account on each trade.

With mini Forex accounts, you are also not going to get the best spreads that your broker has to offer in most cases. Most of the time, the brokers will give their best spreads to standard accounts or institutional accounts. This makes it more difficult for you to earn profit in the long run.

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