Forex brokers offer you three lot sizes to trade. A standard lot controls 100,000 currency pair units, a mini lot controls 10,000 currency pair units and a micro lot controls 1,000 currency pair units. Mini accounts are more than just an inexpensive way to test different trading strategies. You can trade two mini accounts by using one account to enter your trade and the other account to hedge your first trade should the market move against it.
Go online and screen different Forex brokerage firms. Both brokers you select should offer low currency pair spreads without charging any hidden fees. You want both brokers to pay rollover interest when you buy a currency pair but not charge you a fee for holding the currency pair short. Compare the trading leverage both firms offer and the minimum amount required to open an account. Go to an online Forex broker rating site like Forex Peace Army to read the reviews other customers have given the firms. When you have made your decision, open and fund both accounts. (See Reference 2)Step 2
Select your account that pays the higher rollover interest rate to buy your currency pair. If you hold your Forex trade open longer than two days, your broker will pay you the rollover interest amount on your long trade. (See Reference 3) Open your trading window and pull up the chart of the currency pair you want to buy. Use technical indicators to find a good entry point. Place your trade and check your portfolio to be sure the currency pair is listed there. Your trade will earn rollover interest after the second trading day.Step 3
Go to your second trading account and find the currency correlation chart. (See Reference 3) Currency pairs that move together have a +1 rating or higher. Currency pairs that move opposite each other have a -1 rating or lower. Find the currency pair on the correlation chart that moves in the opposite direction of the currency pair you bought. For example, if you bought the EUR/USD (Euro dollar/US dollar) in your first account, sell the USD/CHF (US dollar/Swiss franc) in the second account. (See Reference 4)Step 4
Sell the currency pair in the second account. Remember, you have opened accounts with brokers that do not charge you interest for holding a trade short. The long position earns interest while you wait to hit your profit target. The short position protects your long position without being charged rollover interest.
- You can find daily rollover interest rates on your Forex broker’s website.
- Forex trading can be very risky. Only trade with money you can afford to lose.
Based in St. Petersburg, Fla., Karen Rogers covers the financial markets for several online publications. She received a bachelor's degree in business administration from the University of South Florida.