How to Determine the Best Forex Account for Beginners
Forex traders must be familiar with forex account. There are at least four types of forex accounts that are often used such as a standard lot, a mini lot, a micro lot, and a nano lot. For experienced traders, it is probably not a big problem to decide the size of the lot although sometimes it is difficult to speculate, too. However, it can be a problem for beginners. Actually there is no exact rule on determining the best forex account for beginners. Before talking about what is the ideal size of lot to trade, let’s learn more about sizing your trade.
A lot in forex refers to the smallest trade size to place in the forex market. Understanding the best forex account for beginners is very important since lot size will influence the risk they are taking. Usually new traders who have a little experience uses a risk management calculator or other tools that can help decide the lot size depending on the size of their current accounts. Even, some experienced traders still rely on such tools as they help understand the amount to risk. The tools are applicable for both practice of live trade. There are some different lot sizes you will encounter in your trading career as follows.
Let’s start with the smallest tradable lot called micro lot. This lot consists of 1000 units of your accounting funding currency. The illustration is like this. For a funded US dollars account, a micro lot is 1000 USD worth of the base currency to trade. It means that 1 pip is equivalent to 10 cents. Using a micro lot is recommended for beginners as trading with this lot size is easy. The second lot size is mini lots. It consists of 10 thousand units of the trader’s account funding currency. A pip in a trade is worth around 1 USD. It seems that 1 US dollar per pip is a small amount but it can turn to be 100 pips a day in the forex market. Sometimes, the market can even move 100 pips in only an hour. To avoid big loss, you can start with at least 2000 USD. Keep in mind that the market can move against you.
The next lot size is standard lot which is a 100k unit lot. A standard lot is intended for institutional accounts. In order to trade in this lot size you need to have minimum 25,000 USD. Usually traders trade mini lots of micro lots. You can survive long term if you always consider your account size to decide the lot size you want to trade.
Recommendation for Beginners
Most traders only trade in either micro lots or mini lots. These two options are ideal in tem of risk taking and capital requirement. Don’t ever try to use higher lot size for forex trading unless you have high capital in your account otherwise you will end up losing a lot. In conclusion of the above statement, the best forex account for beginners is the micro lot size.