February 13, 2014

Using Forex Australia Mini Lots to Limit Risks

This article looks at the ways that mini accounts limit the risks you face on the forex Australia market.

Forex Australia Mini Lots

When you trade on the forex Australia market you will notice that forex brokers offer you a number of different account types.  One of the account types is the mini account.  There are many traders who use the mini account to limit the risks that they face on the forex Australia market.  It is important that you understand what the risks that you can face on the market are and how the mini account can help you limit their impact.

What is a Mini Account?

The first point that you have to consider is what a mini account is.  There are three different accounts that most retail brokers will offer you.  The largest account is the standard account and the smallest is the micro account.  The mini account is the middle ground between these two accounts.

The mini account allows you to trade with the mini lots.  Mini lots offer you 10000 units instead of the 100000 units that you get with the standard account.  This also means that the mini account has a smaller pip value.  The mini account needs less capital than the standard account, but more capital than the micro account.

The Risks that You Face on the Forex Australia Market

The better understand how the mini lot helps you limit the risks of the market you need to know what these risks are.  The primary risk that the mini account can help with is the unpredictable movement of the market.  There are times when you trade that the market moves unexpectedly.  This is a risk that you cannot remove from your trading and your only option is to limit the impact of the risk.

The amount of leverage that you use with your trading can also be controlled with the use of a mini account.  Of course, not all mini accounts will help with this and you need to consider that.

The Unpredicted Movements in the Market

The mini account can help you limit the risks of the market movement through the smaller lot sizes that you are trading.  If you make a 10 pip loss on a standard account, that will be a monetary loss of $100.  However, if you make the same 10 pip loss on a mini account, then you are only making a monetary loss of $10.  This major difference in lot value is how you can limit the impact of the risks of the market.  Of course, you have to consider that the use of the mini lot will not only impact your losses, but your profits as well.

The Leverage You Use

There are many traders who do not consider how the mini account can help them with their leverage.  There are brokers that vary the amount of leverage that you can get based on the trading account you have.  This means that a trader with a standard account will be able to get more leverage than a trader with a mini account.  This can help you when you trade because it limits the overall leverage that you can use when you trade.



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