If you want to start forex trading you will probably be looking at a forex demo account. But have you considered a mini forex trading account? Could it have advantages over the demo?
What Is Mini Forex Trading?
A mini trading account gives you the chance to trade with real money in small amounts so you can work with just a small starting fund. With most brokers, the lot size of a mini trading account will be just one-tenth of the lot size for a standard account, so you are risking a lot less.
The 3 Options For Beginner Forex Traders
1. Jump straight in with live trading through a standard brokerage account. You will need to invest between $1,000 and $5,000. This would be very risky for a beginner. Do not try this unless you already have a lot of experience in similar trading environments e.g. stock trading.
2. Start live trading with real money but use a mini forex trading account. Most brokers ask for a minimum investment of $250. You may find brokers who will let you set up with even less, but frankly if you do not have $250 to spare then you probably should not be trading.
3. Use a demo account to start. Here you can pick up trading skills without using any real money. The idea is that you will switch over to live trading (either with a mini account or a standard account) when you are making consistent profits in the demo account.
So Which Is Best: Mini Forex Trading Or A Forex Demo Account?
Most beginners choose option 3, the forex demo, because they feel safer using 'pretend money' to trade online for a while first. It also gives them the chance to try out different systems and strategies.
The problem with this is that if you keep switching from one system to another in a demo, you will never learn how to stick to one system consistently. The fact that it is not real money can also give you a false sense of security. Using a demo account may encourage you to take risks that would make you uncomfortable in the real market.
So in fact what you learn in a forex demo is not always useful when you switch over. You may have learnt to profit consistently using medium to high risk strategies which will give you a lot of stress when you try them with real money. Stress around risk usually leads to bad decisions and 'strategy hopping' where you are all the time changing or tweaking your system. You are virtually certain to lose money if you start doing that.
Therefore it may be better to start with a forex mini trading account, using real money almost at once. Just use the demo for a few trades so that you see how it works. If you start as you mean to go on, with real money, the strategies that you will learn will continue to be useful to you for the long term.
Whether you start with a demo, a mini account or a standard account, you will need to accept that currency trading is always risky. You should only trade with money that you are prepared to lose if the market turns against you. This will help you keep a cool head and make good decisions, and it is true of all investments that hold out the possibility of making a lot of money in a short time.
If you want to start forex trading you need to pick up techniques that will help you for real live trading. Starting with a mini forex trading account can be the best way to do that.
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Jason Cline writes on automated forex trading systems and the forex market for several websites. Check out his blog at http://foreignexchangetraining.blogspot.com
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