This calculator compares the efficiency of risk capital allocation when trading on a mini account with the efficiency of risk capital allocation when trading on a standard account. The allocation efficiency is the function of how well the constraints of both the forex trading system (stop-loss in pips) and the money management system (percent risked) are met. The "Allocation Advantage of Mini over Standard" cell shows the percentage increase in allocation efficiency when trading on a mini account instead of trading on a standard account. 

You can change all the cells on the calculator that are coloured in dark green. The calculator assumes that the pip price on the mini account is 10 times smaller than the pip price on the standard account.

The calculator shows that if you are insufficiently capitalized while trading on a standard account (e.g. with less than $10,000 in it), taking some of the signals from your currency trading system might require compromising on the size of the stop-loss or the percent risked if you are to meet at least one of these two constraints - which would not be necessary if you traded on a mini account.

For example, lets say your have $8,000 in your standard trading account. Your trading system generates a signal to sell EUR/USD with a stop-loss 40 pips above the entry price. Your money management system allows you to risk no more than 3% of your equity - or $240 per trade. Placing the 40 pip stop-loss for the EUR/USD means risking $400 on this trade, which is larger than the maximum allowable risk set by your money management system. Given the above you are left with the choice of either passing up the signal or loosening the constraints of either your trading or money management system. 

Risking more than the amount dictated by your money management system (5% in the above example) or setting your stop-loss at a level closer than the one suggested by your trading system (24 pips in the above example) - or not taking the signal at all - can have potentially devastating results on your trading. Risking more can lead to drawdowns getting larger than you are prepared to withstand. Setting smaller stop-losses (which will get you needlessly stopped out) as well as not taking some of the signals will undermine your trading system effectiveness and over time will erode its profit potential. 

Therefore, if you are starting with less than $50,000 it is best to open a mini account with your forex broker.