forex mini account

[eytan301]

Hi all
I started with a forex mini account and I think it is the best way to learn how to avoid mistakes. Opening a small account is the best way to start forex trading.

[Steve Griffiths]

Hi Guys,

This is one reason why FOREX gets such a bad name. Brokers like this telling people that they can start trading with as little as $100 is complete insanity.

There is absolutely no way that traders can trade effectively when they are under capitalised. Because without enough capital you can never get though the inevitable drawdowns and as such will always be trading on scared money.

I would bet money that virtually 100% of their clients who try and trade with such a small amount of capital will go Broke. The only person to win in this situation is the Broker, he does not care because he will just get another client.

The sooner FOREX becomes regulated and stops Brokers like this from ripping people off, the better........

Just my 2c worth

Steve

[jtrade]

Actually, Steve, whilst I agree 100% with your comments in general about the perils of undercapitalised trading, I do nevertheless think that opening a tiny, but real Fx account can provide a very low risk (in terms of dollars you can lose) introduction to live trading, superior to any form of paper trading as you have real money at risk.

Using microlots ($1k lots, as opposed to $10k minilots, and not even considering $100k standard lots), you are only risking 10 cents per pip, so a 100 pip stop out costs you $10.

FX futures are preferable to Forex in many ways, but trading €125k for one Euro FX contract is way out of reach for most newbies, so why not learn with real money using tiny lot size ?

My $0.0002,

;)

J.

[Steve Griffiths]

Hi J,

Sorry, it was not the "size" of the lot that I was talking about, what I was annoyed about was how so many FOREX Brokers tempt new traders into the market with promises of starting trading with no capital behind them. Opening an account with your credit card with only $100, is not the way to be fully capitalized.

Also, I would want to see their spreads, as that is where most FOREX Brokers make their money. They claim no commission but because they are on the other side of the trade, they catch the trader on the spread.

So all I was suggesting was caution about some of these Brokers, and better to stay with the bigger names and also that every trader should be well capitalized.

Sorry for the confusion.

Steve

[dctommy]

If you trade forex, I highly recommend that you go to this link & read:


http://www.forexfactory.com/forexforum/showthread.php?t=7484&page=1&pp=15


dctommy

[marketwaves]

Hi J,

Sorry, it was not the "size" of the lot that I was talking about, what I was annoyed about was how so many FOREX Brokers tempt new traders into the market with promises of starting trading with no capital behind them. Opening an account with your credit card with only $100, is not the way to be fully capitalized.

Also, I would want to see their spreads, as that is where most FOREX Brokers make their money. They claim no commission but because they are on the other side of the trade, they catch the trader on the spread.

So all I was suggesting was caution about some of these Brokers, and better to stay with the bigger names and also that every trader should be well capitalized.

Sorry for the confusion.

Steve

Steve, I agree with you whole heartedly , so much on this -

Forex is not " Commision Free " as is Advertised to the world

There is a Cost of doing business ! ................
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A trader has to cover a 4- 5 pip spread on every Forex Trade !

[marketwaves]

Hi Guys,

This is one reason why FOREX gets such a bad name. Brokers like this telling people that they can start trading with as little as $100 is complete insanity.

There is absolutely no way that traders can trade effectively when they are under capitalised. Because without enough capital you can never get though the inevitable drawdowns and as such will always be trading on scared money.

I would bet money that virtually 100% of their clients who try and trade with such a small amount of capital will go Broke. The only person to win in this situation is the Broker, he does not care because he will just get another client.

The sooner FOREX becomes regulated and stops Brokers like this from ripping people off, the better........

Just my 2c worth

Steve

You are so right ......

I would add
If you can't trade sucessfully with say $2,000.00
then ...........You can't trade with $200,000 dollars
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The key is to understand Position Sizing
and to not overextend ones self on any individual trades .

[Steve Griffiths]

Hi,

But the point is that with an account as small as $2,000 you cannot use correct position sizing, and without that your probabilities of success are severely limited, that is why most amateur trader fails, because they do not have enough capital, and as such take risks that are too big for their current account size.

That is why I strongly suggest that anybody who wished to trade speculative markets as enough money in their account to apply correct position sizing........

Steve

[alexq]

Perhaps I am missing something here, but I don't understand why a trader can not use correct position sizing for $2,000 forex mini-account with microlots.

For example, if somebody would like to risk 1% of equity per trade, for such account this will be $20. Just as example, let us assume that a trader is entering a trade with 200 pips stoploss (and this fits even end-of-day trading!!!). For mini-accounts, 1 pip for 1 lot is $1, 1 pip for 0.1 lot is $0.1, 1 pip for 0.01 lot (which also could be available for some brokers) is $0.01 (all for USD-based pairs). Therefore, if our hypothetical trader would like to enter the trade mentioned above, his position size should be 0.1 lot. No Problem! :)

In fact, higher accuracy of position size depends here on a particular broker, not on account size!!! If a trader with $2,000 could trade even 0.01 lot minimum for mini-account with some broker, his position size could be more precise that position size of another trader with $100,000 with standard lots and 0.1 lot minimum with another broker.

Let us compare both:)

hypothetical example:
EURUSD; 1% risk; SL=148 pips.

trader#1 with $2,000 at mini-account with 0.01 lot minimum could trade 0.13 or 0.14 lots which are (for our conditions) $19.24 or $20.72, i.e., 0.962% or 1,036% actual risk. Not to be above 1% risk limit, trader#1 will trade 0.135 lots, and thus will have 0.962% risk

trader#2 with $100,000 at standard account with 0.1 lot minimum could trade 0.6 or 0.7 lots (he can't trade 0.67 or 0.68 lots!!!) which are $888 or $1036, i.e., 0.888% or 1.036%.Not to be above 1% risk limit, trader#2 will trade 0.6 lots, and thus will have 0.888% actual risk.

Position size of trader#1 is more precise!!! Trader#2 should have $200,000 to achieve such accuracy!

There could be some problems with small brokers giving mini accounts with microlots but these problems are not related to correct position sizing.

Just my 2c :)

Alex

P.S. Sorry, I made a mistake initially, speaking about 0.001 lot minimum. Now, in this edited version, it is corrected.

[alexq]

Sorry once again, one mistake still remains, and for some reason I can not edit my previous post.

It should be "...trader#1 will trade 0.13 lots..."

[Steve Griffiths]

Exactly, it depends on the Broker and the size of lots (FOREX) available..........

The point I was making is that you must always keep your losses small so unless you can use micro lots to keep your position size under control then you should not try and trade with as little as $2,000.

So for most Brokers this is unachievable, that was all I was saying

I hope this helps.......

Steve