Minimum Money Required for FOREX
In the Forex market, where an estimated $3.98 trillion changes hands every day (as of December 2010), there is no limit to the amount of money any person or group of people can invest in foreign currency trading. But investors whose pockets aren't so deep can get a piece of the action by opening an account for around $50, and in some cases with as little as $1.
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Identification
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A standard Forex account trades 100,000 units of the base currency. If the base currency in the trade is the U.S. dollar, that means one unit equals $100,000 USD. Conservative traders chose mini accounts, which trade 10,000 units of a base currency. But in recent years many Forex brokers have introduced a new type of account that allows traders to buy units of a base currency in much smaller lots. Those accounts are known as micro Forex accounts, and they allow trading in increments of 1,000 units.
Function
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Since micro Forex trades are 100 times smaller than a standard Forex contract, micro accounts are often preferred by novice traders who are using the account to sharpening their skills for the big leagues without having to commit a large initial investment or risk losing a significant amount of money during the educational process.
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Considerations
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While risking only pennies with each trade, a Forex micro account can help you master the emotional challenge of following the often volatile currency markets. But Forex micro accounts also give you the opportunity to test your Forex broker. While perfecting your trading strategies on a small scale, you will also get to see if you are satisfied with how your Forex broker operates. If you are not happy, there are dozens of other Forex brokers who might better suit your needs.
Expert Insight
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Forex trading involves a substantial amount of leverage, which can potentially cause a person to lose more money than they had initially invested. But most Forex micro accounts -- like standard and mini accounts -- have a built-in feature which automatically closes all of a customer's positions that fall below the minimum margin requirement. This prevents any account from sliding into a negative balance.
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References
- Photo Credit currency image by peter Hires Images from Fotolia.com
