How much money do I need to start forex trading?

Got only $100 to put away right now?

You may think forex market is only for the big boys. Well, that has changed. Now with as little as $100 you can start trading. The more important question is which type of account should you choose?

Standard account

A standard account usually requires you to put down $1000 or more to open it. This is definitely not at reach for many prospective traders (especially from the emerging economies). So forex brokers offer mini and micro accounts to meet reach a larger group of people. Also, some might have the money but not too keen to test the waters with $1000 plus commitment. So the best way is to begin with a forex demo account or a micro/mini account.

A micro account is considered to be 1,000 units of the base currency you are trading, a mini is 10,000 units and a standard account is as high as 100,000 units.

Reference Table

1 lot = 100k = 100 000 units (standard lot)
0.1 lot = 10k = 10 000 units (mini lot)
0.01 lot = 1k = 1000 units (micro lot)

Mini & micro account trading example

You should select a broker by a suitable minimum account size (mini or micro) and by a lot size (again - mini and micro). We recommend that if you are not an expert trader with years of experience and/or opening an account less than $1000, start with micro lots (0.01 lot) or less.

Account 1: Balance = $250, min lot size = 0.1 lot. Result: each pip costs on $1
Account 2: Balance = $250, min lot size = 0.01 lot Result: each pip costs on $0.10

Now should there be a two losses of 10 pips (and 4 pips of spread), the total loss = 24 pips

Account 1: $1 * 24 pips = $24 loss – 10% of deposit wiped out
Account 2: $0.1 * 24 pips = $2.4 loss – 1% of deposit wiped out

(10 pips in Forex is nothing! With intra-day forex trading strategies traders lose on average 15 to 25 pips per move!)

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