Forex mini account is ideal for small traders
The forex mini account is meant for traders who are either new to the forex market or want to start off with a low investment. They can open a mini account with as little as $250, as against a regular forex account which requires a minimum investment of $2,500.
The good thing is that owners of mini accounts don’t suffer from any trading disadvantages. A mini account gives them the same benefits that the regular forex account gives to large traders, like free trading platform, small spreads, etc.
What’s more a mini account also comes with the added benefit of leverage. A trader who has a mini account needs to deposit only $50 as the margin deposit for a $10,000 lot trade. This gives the trader a leverage of 200 to 1. Nothing can be more convenient than this because it allows a trader to trade more in a commodity than he has money in his account.
There are five major currencies that dominate trading: the U.S. Dollar, Euro currency, Japanese Yen, Swiss Franc and British Pound. These foreign currencies are traded in pairs or as crosses in the forex ‘spot’ market.
Another advantage is that a mini forex contract size is usually 1/10th the size of the standard contracts where lot sizes are usually 100,000. This reduces the potential loss of a trader. For instance, a forex trader holding a regular account will loose $250 if he sets a 25-pip stop loss. The loss for a mini account trader for a similar strategy will be $25 because the value of a mini lot is 1/10th of the standard lot.
Consequently, the smaller trader has more flexibility in customizing the size of the trades and managing the risk. Thus the traders who want to trade with less than $1,000 will do better business by opening a mini account. This will give them more flexibility in implementing different strategies and more staying power in the forex market since they will be able to take advantage of multiple trades without suffering debilitating losses.
Forex markets: The king of money markets
Imagine a market where more than 10 times the average daily turnover of global equity markets takes place or where over 30 times the daily volume of NASDAQ and NYSE gets traded in a single day. This market is the forex market -- the largest and most liquid market in world trading. The forex markets record a turnover of approximately $ 2 trillion a day!
The forex, FX or foreign exchange market is actually a decentralized,
over-the-counter market, also known as the interbank/ interdealer market. It is a trading facility through which foreign currencies are traded directly between banks, foreign currency dealers and forex investors across the world. There is no centralized location for FX trading activity. All trading is online, and occurs over hundreds of thousands of locations worldwide.
Until recently, the major players of this market were banks. But now, with the ability to leverage large positions with a relatively small amount of capital, the forex market is more liquid than ever and has opened its doors to the small speculators also.
One great thing about this market is its trading hours - 24 hours a day with trading beginning in New Zealand, followed by Australia, Asia, the Middle East, Europe, and America. The major markets involved are London, New York, Tokyo with the US & UK accounting for more than 50 per cent of the turnover. Trading activity is usually the heaviest when major markets overlap.
Today, the crucial factor determining exchange rates is the supply and demand for a particular currency which in turn is governed by the strength of the currency and the world situation. For those investors who know how to read these changes, the forex market is the right place to trade.
Forex research: using knowledge to grow
The forex market is the biggest currency market in the world with everyday transactions totaling $2 trillion. Yet there are very few – a measly five per cent of the traders -- who make large profits. The reason is simple. Most people try to trade on instincts and intuition than on meticulous forex research.
They don’t realize that the forex market moves in a wave pattern -- up, down or remains neutral. The trader therefore has to catch the wave at the right time to make money, and the only way that the trader can locate this wave is through research.
The forex markets are very sensitive to political developments, corporate crises, natural calamities, wars etc. A forex trader needs to master these external trends to make the right investment choice. Otherwise, he should buy market movement reports developed by analysts who specialize in future forecasts, or make suggestions based on past market movements.
There are two basic approaches that are adopted to analyze currency market movements - fundamental analysis and technical analysis. The fundamental analyst concentrates on external factors to forecast price movements, while the technical analyst studies the past price movements.
Technical analysis is based on the principle that markets behave in clear patterns. The analyst only needs to find the pattern to be able to predict how the market is going to move. This analysis can be applied with ease to any time frame or currency trades.
Fundamental analysis on the other hand, focuses on the economic, social and political forces that drive supply and demand of financial instruments. The analyst tries to look at the big picture rather than concentrate on individual currency rates. There are no hard and fast rules for this approach and different people have different ways to analyze the various macroeconomic indicators such as economic growth rates, interest rates etc.
Most traders follow a mixed approach, leaning more on technical analysis than on fundamental analysis.
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