Nearly all investors who learn currency trading generally move on to plan a specific method or strategy to accomplish individual goals. When choosing a forex trading strategy, most think of Japanese candlestick charts, forex indicators, currency pairs and how to find a system of trading that encompasses all of these important aspects. Another equally important aspect of trading – not only in the forex but also in every market – is equity management. Many times a trader will have a phenomenal strategy planned, but can’t take advantage of it because the risk is too high for the deposit value of their forex trading account – which can be anywhere from $10,000 to over $100,000.
Equity management is the single most important factor that a successful forex trader considers every time he or she conducts a trade. It doesn’t matter one bit how well the trader can analyze a currency pair or chart, because overleveraging (risking more than the balance) his or her account on a bad trade could instantly erase all of the profit that may have been made prior to that trade.
Today, some brokers offer traders smaller accounts than the standard $100k forex trading account. These accounts, called mini (generally $1,000 to $10,000) or micro ($1,000 and less) accounts were developed specifically for the budget-minded investor. These more affordable accounts have a downside, however: higher fees and lower returns. The big benefit to the $100,000 standard forex trading account is about $10 per pip return. Conversely, a mini forex trading account will typically yield a $1 per pip return. A micro forex trading account will yield about $0.10 per pip. Traders can open a micro account with as little as $25. For the average trader, a forex investment of this size might not be worth the time. For a new trader, however, this might be a good way to graduate from of the demo account and get his or her feet wet without a huge risk.
While mini and micro forex accounts are an easy way to get started, the real profit potential is with the standard accounts. However, the new trader will benefit from the smaller accounts by stepping into the world of real forex trading with the prospect of real forex money in return.
MarketTraders.com is committed to educating the forex trader in all aspects of foreign currency trading. Click here to get information on a free forex webinar to help you maximize your success in the forex market.
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