Mini-FOREX – FOREX Trading With $100 Deposit

InterBankFX provides its clients with the ability to trade mini-FOREX contracts where margin requirements start at just $100 because the contract sizes are smaller than standard contracts.

This means that the average person can trade currencies alongside those with $100,000+ trading accounts and earn proportionally the same returns.

To trade mini-FOREX, a trader simply specifies a smaller lot size, i.e. 0.1, 0.2, etc. (at any rate, less than 1.0 lot).

Until 2003, there was a difference in trading conditions between mini-FOREX and standard FOREX and a commission of $3.00 was charged for each mini-FOREX contract. In mid-2003, this practice ceased and there is now no difference between mini-FOREX and standard FOREX: there are no longer any commission charges, only the spread.

Keep these things in mind:

The FOREX market is an inter-bank market with a minimum trade size of $1,000,000. How then do $10,000 trades, representing mini-FOREX contracts, get represented in an inter-bank market?

For small deals, clients require a partner, i.e. a brokerage. If the brokerage has a large number of clients trading mini-FOREX then it is conceivable that they could combine those orders to create an inter-bank market contract.

On the other hand, a brokerage with just a few clients would never reach minimum contract requirements to place a trade into the market.

In these circumstances, a brokerage might decide to assume any potential liability in the hope that the majority of their clients would hold losing positions, i.e. the brokerage takes opposing positions to their own clients. If the client wins then the brokerage loses and vice-versa.

A brokerage in this situation may try to tip the balance in their favor by shifting the quotation when closing trades, etc. to create unplanned losses for their clients.

Of course, if the brokerage has been in existence for some time then they have most likely amassed a large client-bank of active traders so combining contracts to take actual positions in the inter-bank market would not be an issue for them.

In such a scenario, the brokerage is not interested in whether a client wins or loses as they will be earning the 1-2 pip spread in either case

In practice, the brokerage does care whether their clients win because winning traders become more confident, active and more profitable for the brokerage.