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Pros and Cons of Using Mini Accounts in Forex Trading

Forex trading is a simple and fast way to enter the financial market. All you need is to select a trusted Forex broker, make a deposit, and start trading a preferable currency pair. However, some beginners can be confused with a variety of different types of accounts.

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Mini accounts are designed to help newbies start with smaller capital. It prevents them from losing much right at once, as all Forex strategies require configuration and proper settings that are adapted to real market conditions.

As a rule, such micro accounts are used to trade in smaller increments. They can vary from one online Forex broker to another. In this article, we will explain how these account types work and what pros and cons they have.

What Is a Mini Account in Forex Trading?

The main idea of using mini accounts is to help beginners start trading with a smaller quantity or so-called mini-lots. When we say “mini lots, we generally mean 1/10th of the typical lot size. In other words, one trades 10,000 units of currency instead of 100,000 units.

Mini Account Advantages

When investors trade mini lots, they enable higher FFX diversification. They have a chance to spread actually the same capital across a bigger number of assets and currency pairs in particular.

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The main advantages include the following:

  1. As a rule, a Forex broker established a low entry barrier for traders who use mini accounts. In simpler words, they do not call for a high capitalization level.
  2. Mini accounts are more available for merchants. Meanwhile, they provide a great chance for beginners to gain the necessary experience while trading with a smaller capital. In other words, we have a better alternative to paper trading or typical demo accounts.

Mini accounts appear to be a great way for newbies to graduate from demo to real-cash traders.

Mini Account Disadvantages

It would be wrong of us to say that Forex trading mini accounts will suit everyone. They definitely have some downsides beginners must consider before using them:

  1. They will make no sense for traders with a well-established strategy and high expertise. When you gain experience, you are likely to target positions of larger size to make a good profit.
  2. Usually, mini accounts have a smaller feature set. For instance, mini traders do not have access to market insights and analytics generally delivered to standard or VIP clients. So, you might want more from a trading platform at some point.

Forex Mini vs Micro Account

These are two different account types. The common thing is that both of them help beginners trade with real money but with minimum or zero risk of huge loss. They will be a good option for users who only start exploring the Forex market.

Generally, mini and micro accounts provide users with the same instrumentation. Major tools involve standard Forex charts, analytics, access to the baseline trading platform, customer support, and more. The only difference here is the entrance barrier. For micro users, it starts from 1,000 units in multiples, while mini traders should enter orders in multiples of 10,000 units.

In some cases, experienced traders use these account types to boost the volume of funds across different currency pairs. Oppositely, beginner traders can use them for working out an effective risk-management strategy with a smaller investment size.

Pips in Forex Mini Accounts

As you all know, Forex trading is based on stated spreads. Every currency movement is referred to as the pip movement. Pips are used to express the currency price across the FX market. Besides, it represents the smallest possible asset price fluctuation.

While trading with mini accounts, the price you lose or earn is significantly small. What’s more, each price is assessed in fractions. This is why brokers specify the quantity of 100, 1,000, 10,000, or 100,000. These quantifiers describe the minimum block of currencies.

In simpler words, a mini account divides currency units into smaller lot sizes that make it possible for investors to benefit from leverage. Pips can have different values. It depends on the currency pair you trade as well as on the base currency price.

Tips to Grow Capital with a Mini Account

Is it possible to grow money with a mini account in Forex trading? The answer is yes. All you need is to take into account specific triggers that point it is time to grow your mini account. The following will let you boost your approach:

  • Open trades and never risk more than 3% on each trade.
  • Use effective Forex strategies.
  • Apply money management techniques.
  • Learn more about trading philosophy and ways to keep control over emotions.
  • Select a trusted and reliable online Forex broker with a fast order execution speed.

The Bottom Line

Lot sizes are very important in Forex trading. If you are new to the market and do not want to risk much of your capital, mini accounts can be a good option. They lower the risk of a big loss. At the same time, one can develop and establish effective Forex strategies in real-time.

However, neither mini nor micro accounts will meet the needs of seasoned and professional traders. On the other hand, they may turn out to be a great diversification tool despite the level of your trading competence.

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.