Mini
Forex Trading:
The Three Stage Approach To Generous Profits
Mini Forex trading usually comes after many months of paper trading or demo account trading - a wise strategy!
However, at some point, if a trader is going to progress, they have to take the plunge and begin mini Forex trading by opening an account with a minimum of $250-$300. At around $1 a pip, the losses are still small and reasonably contained.
Costs start adding up when the account keeps going below the margin level and cash injections have to be made to keep trading.
The three stage approach outlined below shows how to utilize a Forex mini account and use it to make substantial profits:
Stage 1: The Trading With Real Money Mindset
No matter how long a trader practices on paper or in a demo account, nothing can simulate the real world when it comes to trading.
Yes, the trader may like to think they take the demo account very seriously and treat it as if it was real money, but once they start mini Forex trading they soon realize there is a major psychological leap from a demo account to a live account.
This step, going from a demo to a mini is a crucial one and shouldn't necessarily be put off. Be prepared to blow the first attempt. At least you have got your feet wet. If that happens go back to trading in a demo for a while until your confidence comes back. Then have another attempt at mini Forex trading.
Remember, mini Forex trading is still basically practicing for the time when you will manage a regular account.
Stage 2: Maintaining The Mini Account
Once a trader has gone backwards and forwards between a mini account and a demo account a few times, the time will come hopefully when the mini account stabilizes and no longer gets taken below the margin requirement.
This is a great stage to reach. The balance starts to be maintained and now starts to grow, albeit slowly.
Great satisfaction can be derived from seeing the initial balance grow from $300 to $600, a doubling of equity.
Stage 3: Trading Multiple Lots In A Mini Account
When you reach this stage equity can really start to grow. Many seasoned traders recommend keeping your risk on any one trade to 1% to 2% of your equity.
In a mini account however, some traders suggest making the risk larger given the small amount of equity involved.
For example, with $600 in the account, some traders suggest starting to trade two lots instead of one. If equity falls below $600 then go back to trading a single lot until the balance is over $600 again.
The advantage of trading multiple lots is that you have far greater flexibility when taking your profits.
No trade is guaranteed. Price can turn and go in the other direction at any time.
So by trading two lots, one lot can be taken at a conservative target limit, perhaps 15 to 20 pips, and the second lot can be allowed to run to a more aggressive profit limit. At the same time the first profit is taken, the stop can be moved up to break even point so the trade can't lose.
Once the compounding factor kicks in with mini Forex trading the equity can start to grow quite steadily.
Once $2,000 or so is in the account it is probably wise to then revert to the strict 2% limit for risk control from thereon.
Some traders continue with mini Forex trading even when their equity grows to $20,000 or more. Why?
Because of the flexibility.
If you go to a regular account too soon you lose the advantage of being able to trade multiple lots and still stay within your strict risk management.
For example, with equity of $10,000, you may wish to trade 8 or 10 lots. See how this can work: 6 lots can be taken at the first profit target, 2 can be taken out at the second profit target, and the last 2 can be allowed to run in the event price just keeps on going.
The profits from those last 2 lots can add up to a considerable sum in time.
In Conclusion
With this 3 stage strategy, you can turn mini Forex trading into a very lucrative business. Eventually, when you have considerable equity, you may wish to open a regular account.
But don't be in too much of a rush. Mini Forex trading, with compounded profits from using multiple lots, can still pay the successful trader very generously.
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