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About
Forex Trading
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Why
Trade a Mini Account?
The Refco FX Mini account is designed for those new to online currency
trading and those with limited investment capital. There is a smaller
deposit required to open a Refco FX Mini account and trading sizes are
1/10th the size of a regular account. The smaller trade size greatly reduces
the risk associated with currency trading. Although the Refco FX Mini
account provides as much leverage as a regular account, clients have the
opportunity to take smaller size positions, taking on less total risk.
The Refco FX Mini is intended to introduce traders to the excitement of
currency trading while minimizing risk.
More Staying
Power in the Market
In our experience, traders with accounts under $5000 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 regular
Refco FX account is $10 per pip. Therefore, if you were leveraging $1000
to hold a $100,000 (one lot) Euro position (assuming a $2000 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 that 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 Refco FX 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 $5000 account, this is equivalent
to 4% of the account equity, compelling the average trader to take their
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 all 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, 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 less losses.
Until clients are completely comfortable trading currencies on a highly
leveraged basis, trading smaller amounts on the Refco FX Mini is highly
recommended.
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