Things to remember while Online Forex Trading: Online Forex trading is a concept that should be handled correctly; if done with appropriate measures and relevant skills, online forex trading can indeed change your life.
Several traders in the world claim that they have mastered online trading and conceded the forex market far better than anyone.
However, the facts state something different; what people know about Forex is a drop and what precisely the forex market is, is an entire ocean.
Few understand every possible flaw of forex trading; even masters make blunders while trading currencies. Its been three years since I have been dealing with the Forex.
I have witnessed several novice traders stating that forex trading is easy if we trade according to the signals; forex trading is not at all problematic; I can earn millions by reading books regarding forex trading. NO! that is not true.
We have created this webpage for every Forex online traders/ readers who desire to know more about the forex trading market. As I mentioned before, the online forex market is a vast concept to understand.
Traders should always look at these factors while trading with the Forex. Take a look at Things to remember while Online Forex Trading, and feel free to drop your suggestions at dropbox.
What is Online Forex Trading, FX markets, and its terms
FX (Foreign Exchange Margin Trading) is attractive because you can expect a significant return with a small number of investment funds, but on the other hand, in some cases, there is a risk of suffering a substantial loss to the funds in advance.
The details of “loss cut” and “margin” in Forex trading will be described later, but if you do Forex trading without knowing the risk, the following situations are likely to occur.
- A slight price movement will result in a loss cut.
- In some cases, a loss exceeding the margin will occur.
Therefore, it is essential to be aware of the risks of Forex when starting Forex trading. Also, have specific knowledge to avoid troubles.
What is Forex Risk?
In Forex trading, it can be said that suffering a significant loss is the greatest risk. And this risk comes from the “leverage” of Forex.
What is Forex leverage?
Forex trading can be said more technically as “forex trading by leveraging margin.”
Forex has some particular terms, such as “swap point”, that obtain an interest rate differential unfamiliar in stock trading, but “leverage” is probably the most symbolic one.
“Leverage” literally means “leverage”. With the principle of leverage, just as a small force can produce a significant effect, FX is a mechanism that enables large transactions with a small number of funds. Forex can leverage its own investment funds, “margin”, to trade.
What is the risk of FX “leverage”?
Forex trading has the potential to make large profits with a small amount of money, but it also carries the risk of suffering losses.
If this is average forex trading, you will only lose 5% of the investment funds because you will only lose 50,000 INR for the investment funds of 1 million INR.
The amount of loss is the same as FX, but considering the ratio to investment funds, the damage is shallow compared to FX.
What is FX “loss cut”?
If the loss swells and the “margin maintenance rate” drops significantly in Forex trading, “loss cut” will be activated, and there is a risk that Forex trading will be forcibly terminated.
What is the FX margin maintenance rate?
FX’s “margin maintenance rate” means the total margin and valuation profit/loss ratio to the “necessary margin” required by FX.
In Forex, “margin requirement” refers to the amount required to maintain the open orders (called “open positions” and “positions”) currently held, and “exchange rate x number of currencies x 4” It can be calculated by “%”.
When calculating FX’s margin maintenance rate, the required margin of all open positions held is added.
What are the measures to avoid the risk of Forex?
He explained that the risk of Forex is that it suffers a large percentage of the margin deposited.
In particular, loss cut means “forced loss cut” and should definitely be avoided.
In order to avoid loss cuts, it is conceivable to start trading with the following points in mind.
- Keep the margin maintenance rate as high as possible
- Keep losses within tolerance
- Avoid times when spreads widen
- Use a Forex company whose spreads are difficult to spread
Make a deal with margin
Loss cut is activated when the margin maintenance rate drops significantly.
Therefore, in order to avoid loss cuts, it is necessary to maintain the margin maintenance rate as high as possible.
There are two ways to allow the margin maintenance rate to be as large as possible: “add more margin” and “make a transaction for a small amount”.
It is up to each investor to decide how much risk to take, but it is recommended that you start trading after creating your own rules, such as “start trading from about five times the leverage”.
The formula for calculating the trading volume when trading with the leverage you set yourself is as follows. The leverage actually applied to the transaction is called “effective leverage”.
Effective leverage x margin ÷ rate = transaction currency amount.
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