|
One of the most important things to understand with online currency trading is that you are usually not trading with your own money at a 1:1 basis, because if you were than the changes in exchange rates would not make that much of a difference to you. Instead, most forex brokers will allow you to leverage your money at a 50:1 basis or sometimes even higher, which means that any increase or decrease in the exchange rate of the currency pair you are trading is magnified times 50. However in most cases, even if a trade goes against you it is not going to be possible for you to lose more money than you funded your account with because if your capital gets too low then you will get "stopped out" of the market by a margin call. The margin call is a safety precaution that really has a forex trader's best interest at heart, since it makes it impossible for your account balance to become negative, but it also means that if you are trading without enough capital or you are over-leveraged then you might need to exit the market prematurely. If your trading account ever hits a margin call level, this is an indication that you are either using a level of leverage that is too high for your trading balance, you are trading with too big of a lot size, or you are holding on to a losing position for too long. The good news is that each of these factors is within your control, and by following simple money management rules you can make sure that you preserve the integrity and security of your trading account. One of the basic money management rules that forex traders can use in order to safely trade with a high level of leverage is to only risk a certain percentage of your account balance on any given trade. Some traders stick with 5% as a level to risk for each trade, and more conservative traders may only risk 1-2% per trade. By developing a money management rule that works for your specific trading style you can reduce the risk that comes with leveraged forex trading. It is important to remember that forex trading is on of the riskiest forms of trading out there mainly for the reason that every account is a margin account which is leveraged at a certain percentage that is decided by the trader. By learning about leverage in the financial market and how it can lead to a margin call on your account, you can make sure that you are always trading safely by following a number of rules that govern the amount of risk that you are taking on. Algorithmic forex trading is one of the opportunites today that can allow retail traders working from home to have access to institutional level trading tools when trading the forex interbank market.
Related Articles -
Financial News, Financial Services, Financial Services Education, Financial Services Industry, Foreign Exchange, Foreign Exchange Market, Forex Market, Forex,
|
