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Mini-Forex – A Great Starter Market for Day Traders

Mini-Forex – A Great Starter Market for Day Traders
June 07
02:42 2011

One of the appeals of trading in forex markets is the low capital requirements for establishing an account.  At $1,000, the opportunity for trading forex is within the reach of most average investors. With the advent of “mini-forex” trading, and its low $250 capital requirement, its reach extends to even more people who would like to test their mettle at day trading.

Essentially, a mini-forex account is just what the name implies; a miniature version of a standard forex account scaled down to 1/10th its size in all aspects. For instance, a mini lot is 1/10th the size of a forex lot. And the stop loss of a mini-forex trade is measured at 1/10th the amount of a regular forex trade. So, where a 25-pip stop loss on a forex trade is equal to $250, the same stop loss is equal to $25 on a mini-forex trade.  The unit sizes in which forex trades are measured are all reduced by 1/10th for mini-forex. It’s like trading forex in Munchkin Land in the Wizard of OZ.

So, with mini-forex, the stakes have been lowered, however, it offers the same free trading platform as regular forex, so the experience is the same. It is an opportunity to learn the same strategies and methods for successful forex trading at a lower intensity. And, although it takes longer to build your profits, you will be building your confidence more quickly without the pressure that comes with high stakes trading.

With smaller stakes, you can focus more on the mechanics of your trading strategy without the distraction of emotions. With any new form of trading, it is always advisable to move up the learning curve using paper trading, but with mini-forex, you may be encouraged to enter the real market sooner which can accelerate your learning.

Your expectation should not be to get rich with mini-forex, but rather to prepare you for the higher stakes of forex. It should be used as a time to build knowledge, confidence and capital that will ensure a smooth transition to the forex market.  When you do make the switch, you will be trading in the same market, with the same currency issues, the same trends and volume, just on a larger scale.  So, the transition should be fairly easy.  But don’t be in too big of hurry. The potential profits of forex will always be waiting for you, so take away everything you can from mini-forex.

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One of the most common and destructive mistakes a day trader makes is to simply not follow their plans. Temptation, an “obvious signal”, and just simple greed can lead traders down the road of being undisciplined. This is without a doubt one of the most dangerous mistakes, as traders will often lose more than they originally planned as they raised their amount risked.

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