More Staying Power in the Market

In our experience, traders with accounts under $5,000 are more successful trading a Mini account. Trading currencies during times of heavy market volatility can be very risky if you are overexposed. Many traders have too small an account balance to last out even a small market movement against them or to make trading mistakes. Because of the reduced margin requirement associated with the Mini account, traders are less likely to experience early margin calls.

The approximate pip value on a standard account is $10 per pip. Therefore, if you were leveraging $1,000 to hold a $100,000 (one lot) euro position (assuming a $2,000 account), the market would only have to move 100 points, 1 percent, to generate a margin call. This can happen in one day. On the Mini, however, the margin requirement is only $50 per lot. So a trader with $200 who opens a 1-lot Euro position can withstand a market swing of 150 pips - 50% greater than what the trader would have on the regular Saletlx account.

Develop a Disciplined Trading Strategy without Focusing on P/L

The Mini account can be a useful asset in assisting traders to cultivate a disciplined trading strategy without focusing on P/L. When trading larger volumes on the standard account, traders with smaller account balances tend to watch their equity fluctuate and base trading decisions on emotional reactions to these fluctuations. For example, such traders tend to resist closing-out trades at a loss, using the rationale that the market will turn around. Undercapitalized traders also tend to immediately take their profits when the market is moving in their direction, rather than maximizing their gains by letting their profits run.

For example, a 20-pip profit on a 100,000 euro trade is $200. For a $5,000 account, this is equivalent to 4% of the account equity, compelling the average trader to take his profit, though the trade has a 100-pip profit potential. On the reverse side, no one wants to realize a $200 loss, so traders tend to hold a losing position until the loss is too much to bear. On the Mini account, this same example would translate to $20, which takes the emotion out of the P/L, since $20 is insignificant to most traders. A Mini account allows traders to focus on the proper chart points and trade signals, and really learn currency trading without paying as much attention to their P/L. In the long run, this will hopefully lead to more profits and fewer losses. Until clients are completely comfortable trading currencies on a highly leveraged basis, trading smaller amounts on the Saletlx Mini is highly recommended.