The Risks Of Online Forex Trading When Using Margin Accounts
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.
Safeguards can be put in place to prevent this from happening, and these are called "stop loss orders". Stop loss orders will mean that your account automatically closes the transaction when the currency you are trading falls to a certain low. These stop loss orders can limit losses, while allowing for profitable trading
The greatest risk to your deposit on a currency lot in a margin account is often overlooked. This is that the broker you have lodged your deposit with, may close your position if the losses look set to wipe out your deposit balance. You might have been aware of the downward trend and may have been awaiting a turnaround but if your broker is not aware of this and he closes your position you lose the deposit money in your margin.
As we said previously, there are both large risks and large rewards in online forex trading. Professional people are seeing the benefit in trading and are leaving traditional professions to become traders. They need to understand that it is vital to know what they are doing in order to ensure success. Stop loss orders are not the only way to protect your investment in this market. Knowledge is vital! It is important to know how to read market trends and traits, and understand how both profits and losses are made. - 23159
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.
Safeguards can be put in place to prevent this from happening, and these are called "stop loss orders". Stop loss orders will mean that your account automatically closes the transaction when the currency you are trading falls to a certain low. These stop loss orders can limit losses, while allowing for profitable trading
The greatest risk to your deposit on a currency lot in a margin account is often overlooked. This is that the broker you have lodged your deposit with, may close your position if the losses look set to wipe out your deposit balance. You might have been aware of the downward trend and may have been awaiting a turnaround but if your broker is not aware of this and he closes your position you lose the deposit money in your margin.
As we said previously, there are both large risks and large rewards in online forex trading. Professional people are seeing the benefit in trading and are leaving traditional professions to become traders. They need to understand that it is vital to know what they are doing in order to ensure success. Stop loss orders are not the only way to protect your investment in this market. Knowledge is vital! It is important to know how to read market trends and traits, and understand how both profits and losses are made. - 23159
About the Author:
Learn more about online forex trading. Stop by John Eather's site where you can find out all about forex trading systems and what it can do for you.
posted by X - Men @ 6:04 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home