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The Forex Capital Management Mini Account is for those just getting started in on line currency trading, as well as those with limited investment capital. A smaller deposit is required to initiate a FCM Mini Account. Transaction sizes are 1/10th the size of a regular account.
Smaller trades can greatly reduce the risks associated with currency trading. Although the FCM Mini Account provides the same amount of leverage as a regular account, our clients have the opportunity to take smaller positions and incur less total risk. The FCM Mini Account is a great way to introduce you to the challenge of foreign currency trading with reduced risk.
More Market Staying Power
Traders with account equity under US$5000 are generally more successful trading Mini Accounts. Currency trading during periods of heavy market volatility can be risky if your position finds you overexposed.
A small balance in a regular account makes it very difficult to outlast even small market movements against a position, and there is very little room for error. The reduced margin requirements of the Mini Account help traders to avoid early margin calls. The approximate pip value on a regular FCM account is US$10 per pip. Assuming a US$2000 account as an example, if you were leveraging US$1000 to hold a US$100,000 (one lot) Yen position, the market only has to move 100 points, or 1 percent, to generate a margin call. This can happen in a very short time.
Mini Accounts carry a $50 margin requirement per lot. A trader with $200 that opens a 1-lot Yen position can withstand a 150 point shift before the margin is called – 50% greater than what the trader has available to them through the regular FCM accounts.
Use a Mini to Discipline your Trading Strategy Without Focusing on P/L
The Mini Account assisting traders in cultivating a disciplined trading strategy without having to focus on profit and loss. Traders with larger volumes in an undercapitalized account tend to encounter severe equity fluctuations, forcing the trader to base decisions on emotional reactions and not the overall strategy. Such traders tend to resist closing trades at a loss, holding out in the hopes that the market will turn. Undercapitalized traders in standard accounts also tend to take profits immediately when the market moves in their direction, preventing maximization of gains through letting the strategy run.
Carrying through our example, a 20-pip profit on a 100,000 Yen trade is US$200. For a US$5000 account, this is 4% of the account equity - compelling reasons for the undercapitalized trader to take the profit, even if the position might have a 100-pip profit potential. On a 20-pip drop, who would want to incur a $200 loss? Undercapitalized traders tend to hold losing positions for too long in the hopes of a market turnaround.
In a Mini Account capitalized with US$5000, the same 20-pip moves translate to US$20, taking the emotion out of the experience. Mini Accounts help traders focus on the fundamentals and learn currency trading without undue concern for day-to-day profit and loss. By learning the process in this way, traders should be able to increase profits over time. Trading a Mini Account is highly recommended prior to making any highly leveraged trades in the foreign exchange marketplace.
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