Forex Account Sizes

Less money needed to open an account is not the only benefit. These smaller account sizes also mean that you will have less money at risk while retaining the leverage that forex trading provides. So what account size would be best for you?

The advantage of micro accounts lies in the amount of money you need to open an account. You will see that the minimums needed to open up a new account are very low. The micro accounts are a perfect vehicle for someone just starting out as a forex trader, although more experienced traders use them as well. You can still get the feel of price moves in the currency markets, but without the large monetary outlay. You can also use micro accounts for perfecting your trading strategy as well as your risk management skills. Given that you have smaller account sizes, your monetary gains can be controlled or kept reasonably low.

Once you have gained confidence in your trading ability and started making profits consistently in your forex trades, you may wish to consider a bigger account size. That leads us to:

Many brokerage firms in the US require that you have at least $500 in your account. That minimum is quickly being replaced by a new one of $1,000. The mini account is for a trader who is more experienced and wants to make a decent profit. Inexperienced traders should not be trading mini accounts, given that it isn't a good place to learn to trade the forex market. You should move up to this level only when you have gained experience trading in micro accounts.

However, traders of all experience levels trade the mini account. You can find many professionals trading mini accounts when they are testing out stops and other trading ideas.

There is one more account size offered by forex brokers:

Again, $10 may not sound like much, but think about what a simple 10-point move against you means. That 10-point move turns out to be $100. Now you can see why only institutional traders are trading accounts of this size. With standard accounts, you need to be very well funded and have expert skills to make money. You will not find novice traders in this level. If you do, they are simply there because they enjoy losing money.

A standard account size is usually a minimum of $10,000, but that is a small amount. Most experts would recommend having at the very least $25,000 to get started, and given the high leverage, this amount could be extremely risky.

Choosing the right account size rally comes down to a few key points. The first is your experience level in forex trading. If you are new, you should start at the micro account just to get your feet wet. The micro is a great way to learn the behavior of the forex markets, and how news and the time of day affect prices. More important, you can test and make changes to your risk management as well as your trading rules quickly and with far less pain.

The move to a standard account is a lot riskier and will require more money. Many professional traders will not even consider trading a standard account. The volatility as well as the money required is far too steep.

Finally, start slowly and work your way up. It's the best way to gain confidence and self-control.