Anyone who is thinking to start trading currencies must consider to start on a mini account. In the early days of Forex market only rich people could fund their accounts to trade currencies. Nowadays you don't have to have million dollars to make profit trading currencies. Many brokers offer mini accounts that allow average people like you and me to get involved in Forex.
When you trade in Forex you need to be buying and selling a regular lot of 100,000 currency units. Today some brokers allow you to trade with one tenth of that amount or 10,000 units which is a mini lot.
Brokers give opportunity to trade with leverage. It's common to see them to give leverage as high as 100. With leverage you don't even need to have that much money in your account to trade. For mini lot of the size $10,000 you need only $100. To control a regular lot you need $1000.
That's the basic reason why Forex trading is so popular. Most people can commit $100 or so to open a mini account and start trading currencies.
The price change in Forex is measured with pips. The pip value for many currencies varies with the currency price. For those currency pairs where US dollar is a base currency the pip value is $10 for a regular lot and $1 for a mini lot. For other currencies the pip value is close to these values but need to be calculated each time based on price of the currency pair.
Trading a mini lot of 10,000 and with leverage 100 you need to commit $100. Depending on a currency pair you are trading a price change by one pip will cost you or bring you around $1 or 1% of what you invested in one min lot.
Therefore you always need to use a stop loss. Otherwise a move of 100 pips against your position will wipe out your investment of $100. So allowing price to move 20 or 30 pips against your account will mean setting your stop loss at that level.
Once you learn to trade with consistent profit you may want to move to trade trade regular lot size. However depending on your broker you can do the same on a mini account trading 10 mini lots. The profit potential will be as if you were trading using a regular account. However this option can give you much more flexibility in terms of taking profit and placing stop losses since you can take partial profit and reduce your risk.
Not so long ago regular accounts with the standard lot sizes were available to wealthy people who could risk large amounts of money. Mini account is a development in Forex market that allows a regular people to try themselves in trading currencies.
A few year ago some brokers started to offer even micro account. It gives you a micro lot size 100 times smaller than a standard lot. No matter which account you chose to start your trading you need train yourself on a demo account.
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