In my effort to become a more informed FX Trader I stumbled across this website that I thought might be of interest to anyone who is interested in learning a little more about the Foreign Exchange markets.

www.BabyPips.com/school/

Those of you already versed in technical analysis can probably skip through a number of the lessons but there is still a lot of useful information on the site. I found the author’s insights into the differences between an FX standard, mini, and micro account interesting.

One of the main reason new traders fail is due to under capitalization. Professional FX Traders trade 1 standard lot ($100,000) per every $50,000 in equity that they have. However, it’s easy to loose sight of this fact when brokerages entice you by saying that you only need $2,000 to open an account. So before you dive in there and start trading $100,000 lots with a $2,000 account, ask yourself if you are really 25x more skillful than the professionals.

Based on your starting capital you should open the following kind of FX account:

Standard Account (1 lot = $100,000) : Recommended capital: $50,000/lot you plan to trade
Mini Account (1 lot = $10,000) : Recommended capital: $5,000/lot you plan to trade
Micro Account (1 lot = $1,000): Recommended capital: $1,000/lot you plan to trade

If your starting capital is less than $1,000 you should start with a demo account until you have enough to open a micro acct. And regardless of how much money you start with, the author recommends trading/practicing with a demo account for at least 2 months before placing a single live trade.