Mini account allows traders to make transactions using mini lots which is equal to USD10,000 (0.1 lot), or one-tenth of a Standard account.
Brokers usually offer real accounts for a trader on various levels. There are micro, mini, and standard accounts. These types of accounts allow the trader to choose according to their trading criteria and abilities.
Now, we will discuss the mini account, which is a trading account with a smaller lot size equal to 10,000 unit currency (0.1 lot).
If you are a beginner, this type of account will suit your needs. Why? Check out these reasons!
What is a Mini Forex Account?
Mini account allows traders to make transactions using mini lots which is equal to 10,000 (0.1 lot), or one-tenth of a Standard account. Usually, brokers provide a mini account as an option to get new customers who are hesitant to trade with standard lots due to the amount of capital needed.
A mini account used leverage as borrowed funds in to help traders with small capital. For instance, if it's calculated using a 100 : 1 leverage ratio, trading on a mini account only requires a USD100 margin for each lot to be traded.
Mini forex accounts can also help traders reduce their risk in other ways. For instance, trading in mini lots can permit greater levels of diversification, because the same amount of capital can be invested across a greater number of lots.
How Mini Forex Accounts Work
As we mentioned above mini account use lots one-tenth the size of a standard lot: 10,000 units. Because currencies trade-in "pips," which each represent 1% of a single basis point, a currency movement equal to a single pip would result in a $10 charge for a standard lot.
However, that same one-pip move would result in only a $1 change if the trader used a mini lot position. Mini forex accounts allow traders to make use of these smaller, less leveraged lots. For this reason, the mini account is suitable for beginners, or those who are not ready to bear the risk of loss on a Standard account.
How to Calculate Profit/Loss in Mini Accounts
Calculating profit and loss in a mini account is similar to calculating it in a standard account. The main difference lies in the position size, as mini accounts typically have smaller lot sizes compared to standard accounts. Here's how you can calculate profit and loss in a mini account:
Let's assume you have a mini account and you decide to buy 1 mini lot (0.1 lot) of EUR/USD at the current exchange rate of 1.2000.
If the trade moves in your favor and the EUR/USD exchange rate rises to 1.2050, that's a 50-pip increase.
To calculate your profit, you can use the following formula:
- Profit = (Number of Pips x Pip Value x Number of Lots)
- Pip Value for 1 mini lot of EUR/USD = 0.0001 (1 pip) x 10,000 (mini lot size) = $1
- Profit = (50 pips x $1/pip x 0.1 lots) = $5
If the trade moves against you and the EUR/USD exchange rate falls to 1.1950, that's a 50-pip decrease.
To calculate your loss, you can use the same formula:
- Loss = (Number of Pips x Pip Value x Number of Lots)
- Loss = (50 pips x $1/pip x 0.1 lots) = $5
Pros and Cons of Mini Accounts
|Mini accounts allow traders to start with a smaller amount of capital, making them more accessible to beginners and traders with limited funds. It reduces the barrier to entry into the forex or other financial markets.
|The smaller lot sizes in mini accounts also mean that the potential profits are limited. Even with successful trades, the overall profit may not be as substantial as with standard accounts.
|With smaller lot sizes, traders can manage risks more effectively. Losing trades have a smaller impact on the account balance, allowing traders to survive longer during losing streaks.
|Although mini accounts have lower capital requirements, they may have higher trading costs, such as spreads and commissions, compared to standard accounts.
|Mini accounts are great for beginners who want to gain trading experience and practice their strategies without risking significant amounts of money. It allows traders to get accustomed to real market conditions while minimizing potential losses.
|Trading with smaller lot sizes might not fully prepare traders for the psychological and emotional challenges of trading with larger amounts. Real-life trading with significant capital at risk can be quite different from trading with smaller amounts.
|Trading with smaller amounts can be less stressful for some traders, as the emotional impact of winning or losing is not as intense as with larger accounts.
|Some mini accounts may have less liquidity, especially in less popular currency pairs or instruments.
|Some brokers offer higher leverage on mini accounts, allowing traders to control larger positions with a smaller amount of capital. While this can amplify profits, it also increases the risk of losses.
|Higher leverage on mini accounts can tempt traders to take on more risk than they can handle.
How to Get Mini Forex Accounts
The majority of forex brokers existing today have offered mini accounts in their services. All brokers allowing trades with a minimum of 0.01 lot size basically pass as mini account providers since traders can choose to trade with 0.1 lot in the condition. Some of them are:
- IC Markets: IC Markets offers trading in mini lots, and even micro lots, across all types of accounts with raw spreads as low as 0.0 pips.
- Exness: Exness offers Standard and Professional Accounts (Raw, Zero, and Pro), all of which allow trading with a mini lot.
- Pepperstone: Pepperstone offers two types of accounts, namely Razor and Standard Account, both of which allow mini lot as the minimum transaction size in bot accounts is micro lot.
- FBS: FBS offers trading in mini accounts with spreads starting from 1 pip and a minimum deposit of €100 (or equivalent in $).
- OctaFX: Two OctaFX accounts, namely OctaFX MT5 and OctaFX MT4, both allow mini lot trading with a minimum deposit of $100.
- HF Markets: HF Markets also allows trading starting from mini lot on all four of its accounts: Premium, Pro, Zero, and Cent accounts.
- XM: XM provides mini accounts (excluding the Standard Account) for forex trading with a minimum deposit of just $5.
- Admirals: The Trade.MT5 and Zero.MT5 accounts of Admirals allow trading with mini lots, down to micro lots, with spreads starting from 0 to 0.5 pips.
- InstaForex: As a broker that offers numerous bonuses, InstaForex also allows trading with a minimum lot size from 0.01 for all types of accounts, so they provide mini lot by default.
- RoboForex: RoboForex has 5 trading accounts, each of which allows trading with mini lot except for the R StocksTrader account.
Despite the advantages of mini forex account, the safest way to test your knowledge in advance is still on a demo account. There are many forex brokers providing a demo account and it does not use real money.