Forex market, newbies should be aware of the nature of speculative currency transactions and the risks associated with this type of activity. The latter must be taken into account along with an objective assessment of the ultimate goals, personal experience, available financial resources, and other aspects of trading. Unfortunately, the risks are inevitable! But a real pro differs from an amateur in that he plans his losses in the same way as profits.
Make Large Trades Only With A Leading Broker!
According to XM Review, this broker offers fixed margin requirements and monitors trading risks in real-time. It does not set limits on the minimum deposit. The main condition is to ensure a sufficient margin. Margin is the amount of collateral to cover credit risks. The value is determined as a percentage. For example, if the margin is 1% for a position of $ 100,000, you need to fund your account with 1,000 USD. Stop-out is the balance of funds on the account, at which open positions are automatically closed. The Stop Out suggested by the XM broker is 20%. When concluding a deal to buy or sell a certain asset, a trader can give an order to close the deal when the price of the purchased currency (stocks, bonds, futures) reaches a certain level. Traders perform this action using stop orders, take profit, and stop loss. The latter is responsible for the number of probable losses. There are two options for planning the size of the loss:
- Most trading guides advise not to lose more than 2% of the deposit amount from one transaction. So, the size of the stop loss should be no more than 2% of the funds on the balance of the trading terminal. As a result of increasing the deposit, the amount of permissible losses grows up as well. The disadvantage of this option is that in case of a drawdown, to maintain the level of risk, it will be necessary to significantly reduce the volume of transactions, which will increase the time required to restore the deposit;
- For some traders, it is easier to fix the number of losses from one trade. For example, with a deposit of $ 1000, the transaction is closed as soon as the losses reach $ 15. This indicator remains even with an increase in the trader’s funds. This approach allows you to reduce losses while increasing the amount of the deposit.
The XM broker reminds that the size of the acceptable risk is only a boundary value, and the stop loss itself should be set, taking into account the market situation. https://forex-up.com/broker-reviews/xm-review/
Calculate The Risks Correctly: Provide Yourself With A Financial Cushion In Advance!
An experienced trader, making a deal, calculates in advance what part of the deposit he is ready to donate in case of unforeseen circumstances. In general, the lower the percentage of successful trades in the applied strategy, the lower the risk for each of them should be. It is how it looks in practice:
- The comparative probability of profit and loss is estimated;
- The limit of losses for a single deal is limited in % of the deposit;
- The size of the trading lot is calculated depending on the amount of the deposit;
- The size of the stop loss is set in points.
Planning losses primarily has a psychological effect and does not allow the trader to drain the deposit under market pressure, and the main thing is to follow the established rule. One of the prerequisites for successful trading is choosing a reliable broker! Most of the opinions on the XM broker are positive. It provides flexible leverage, negative balance protection. Besides, low-risk trading in micro-lots is available for all types of accounts.