Opening a Mini Account
How much should I open my mini account with?

It is true that all customers that open mini accounts with $250 or more get our exclusive mini trading ebook, but we suggest that mini accounts be opened with as close to $1000 as possible (or more). Why, do we suggest this? Isn't it safer to open an account with less? Not necessarily. Continue reading to find out more.

Example: Size Matters

By depositing more money (rather than less) in your mini account, you can increase your staying power in the market. "Why," you ask? Read on.

Since it is fair to assume that you are reading this because you are interested in mini accounts and trading, let's assume that you open a mini to trade currencies. Even though you can open the account with more than $250, you decide to deposit only $250 because it is the "minimum" requirement. So far so good, right?.

You decide that you are going to set stops that are 15 pips away from your entry price, since stops from 15 to 20 pips are typically used in active day trading [if this is beginning to sound like Chinese to you, please read through the EDUCATION section of this website]. You decide to take positions consisting of 3 mini lots (you will learn why the use of multiple lots is important in the forex e-book). Now let's start trading!

After your strategy gives you a buy signal on the GBP/USD, you buy 3 mini lots and set a stop (potential exit point if the trade goes against you) that is 15 pips away from your purchase price. OK, pause for a moment (Please note: Placing Contingent Orders may not limit your losses to the intended amounts).

Think about what is really going on behind the scenes here. Each pip is worth US$1 in the GBP/USD currency pair (explained in the EDUCATION section). A 15-pip stop thus represents a potential loss of $15 per lot. Factoring in the 3 mini lots, your total loss could be $45. No big deal, right? Wrong! A $45-loss is huge and unacceptable for a $250-account. It is almost 20% of the entire account size! If you have a few losing trades in a row, your account will be destroyed. Not very smart money management.

Now, let's do the same example above, but this time, let's assume that you deposit $1,000 in your mini account instead. In this instance, a $45 loss would be less than than 5% of the value of the entire account. Consequently, you would have to have over 20 losing trades in a row for your entire account to disappear. In our mini e-book, we explain why you don't want to lose more than 5% on any trade.

Using smaller stops - Does it work?

Often times, new traders ask this question. It sounds like a logical thing to do, doesn't it? Just set smaller stops, lose less per trade, and you will be better off at the end. Wouldn't you? We disagree. In our opinion, you'll run the risk of destroying yourself if you try to do this. The reason why it won't work is because of the natural noise or volatility of the market. Once you try to set a stop loss much smaller than the one used in the example above, you will get stopped out a lot more often and your losses will compound rather quickly until your account is wiped out.

If you have read this far, you have learned a very important money management lesson. Congratulations! So again we reiterate: we recommend that you open a forex mini with $1,000 or more if appropriate for your particular finacial situation.

"But I cannot open an account with $1,000," you say. If this sounds like you, we suggest that you try to come as close to $1,000 as possible. For example, $500 is not as good as $1,000, but it is a lot better than $250. No matter what you open your account with, please read the e-book completely BEFORE you start trading.

Open a mini account online by clicking here.

Return to the forex mini section by clicking here.

Do you have a question about setting up a mini account? Call us at 305-600-4651 or email us at support@currencytradingusa.com and speak to a human being.