The Risk And Reward Of Online Forex Trading With Margins
There are many benefits to using margin accounts when participating in online forex trading to make a profit. However, there are also associated risks! Because the potential to make profits has been increased it has to be understood that so have the potential for losses. The trader has to be very careful in order to endure that their entire margin account is not wiped out.
If your margin account stands at a leverage ratio of 100:1 or 1% on a lot unit of $100 000, even a one cent move of a currency in the wrong direction will see this deposit completely wiped out. Essentially this means you lose $1 000!There are methods and safeguards in place that will limit these losses, for instance "stop loss orders". These will automatically close your position if the currency drops below a certain point. They will allow traders to limit losses, while still allowing potential profit to be earned.
One risk which is often overlooked is the fact that your broker may well simply close your transactions if it appears as though your losses are approaching the balance you have in your margin account. Even though you are aware of a down trend and are riding it out, while you expect a market reversal. You may well find that you have to replenish your margin account or your position will be closed. If this should happen, you will actually lose all the money in your margin.
While there are both risks and rewards when trading online in forex margin accounts, this is the case with any type of investment process if you hope to make big profits. Professionals are trading places with their jobs as doctors, accountants, lawyers and other enterprises, in the inherent belief that they can make far more money by online foreign exchange trading. They also need to take the necessary precautions to protect their investment.
Protecting this investment does not only entail "stop loss orders" however, these professionals the same as all of us, have to be educated in the psychology of forex trading in order to be successful. While some skill can be self taught, what better way to protect your investment than undergoing formal currency trading education? - 23212
If your margin account stands at a leverage ratio of 100:1 or 1% on a lot unit of $100 000, even a one cent move of a currency in the wrong direction will see this deposit completely wiped out. Essentially this means you lose $1 000!There are methods and safeguards in place that will limit these losses, for instance "stop loss orders". These will automatically close your position if the currency drops below a certain point. They will allow traders to limit losses, while still allowing potential profit to be earned.
One risk which is often overlooked is the fact that your broker may well simply close your transactions if it appears as though your losses are approaching the balance you have in your margin account. Even though you are aware of a down trend and are riding it out, while you expect a market reversal. You may well find that you have to replenish your margin account or your position will be closed. If this should happen, you will actually lose all the money in your margin.
While there are both risks and rewards when trading online in forex margin accounts, this is the case with any type of investment process if you hope to make big profits. Professionals are trading places with their jobs as doctors, accountants, lawyers and other enterprises, in the inherent belief that they can make far more money by online foreign exchange trading. They also need to take the necessary precautions to protect their investment.
Protecting this investment does not only entail "stop loss orders" however, these professionals the same as all of us, have to be educated in the psychology of forex trading in order to be successful. While some skill can be self taught, what better way to protect your investment than undergoing formal currency trading education? - 23212
About the Author:
Make sure to sign up for John Eather's informative ecourse and reports about Online Forex Trading. Obtain the most cutting-edge information concerning forex trading. Go to MoneyMakingFxTrader.com to learn more.
posted by X - Men @ 2:39 AM
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