Thanks to the recent consulting related to the sale of derivative products to retail customers and traders, the Financial Conduct Authority (FCA) plans to implement similar measures now, while it is intending to extend such limitation so they include also products that can be easily substituted to a certain extent.
The reason for such extension of existing limits is the revelation of serious risks for the clients who trade at retail markets.
Currencies do not deliver returns in the form of interest payments or dividends like equities do. These instead merely wage that the value of an asset will rise or fall compared to another.
So, rather than investing in currencies as a means of hedging risk, the foreign exchange traders act more as speculators in the market than investors.
If you want to truly succeed at this, you must be willing to sacrifice some things and you must be willing to do what it takes to master the skill of forex trading.
Every trader is vulnerable to the many emotions that come with trading. If we allow our emotions to dictate our trading decisions, then it is very likely that we will make irrational decisions that are based solely on emotion, rather than on sound trading practices.
Anyone who is interested in Forex trading or investing is probably already getting bombarded with a huge number of ads and promotions on a daily basis, promising huge returns over a short period of time.
The risk/reward ratio in trading is the relationship between the size of your stop loss to the size of your profit target. So, for example, if your stop loss is 50 pips away from the entry price and your profit target is 100 pips away from the entry then your risk to reward ratio is 1:2.
The risk/reward ratio is no doubt, a very important aspect that should always be considered before taking any trade as an integral part of a good risk management strategy. This may seem like a no-brainer, but it’s amazing how easy it is to forget about it once you spot a good looking chart pattern or a nice trading signal.
Forex trading is, without a doubt, a very speculative type of investment that requires making very good and suitable market predictions that make your chances of generating profit higher.
While losses are an inherent part of the world of forex trading, a number of measures have been created since modern forex trading has come around that can be used by traders to not only protect their own capital, but also to potentially increase their success rate in individual trading sessions.
This article will not tell you about all the individual order, what we would like to tackle, at least partially, is the issue of frequent closing of profitable or losing positions.
We all know that trading Forex is a risky business and we encounter risks with each trade on a daily basis. It’s our duty as traders to protect our capital from these risks as much as possible.
Recently, the hottest topic in the world of financial markets is the planned ESMA regulation for sure, not only restricting trading binary options completely, but it also limits the use of financial leverage followingly:
Generally, it is seen as something negative and everybody wants to avoid it, but experienced traders realize that losing is the only thing we can control through money management.
The approach towards losses is clear: they have to be as small as possible. The lower a loss is the better.
Specifically, there are two key aspects of your account statement that give a valuable insight into how well you are performing as a trader. Essentially, these two key aspects are the relationship between your average winning trade to your average losing trade and the win per trade ratio or also known as the winning percentage.
Anyone who is into Forex trading more seriously has probably started with one ultimate goal – to be able to live from the generated profits by trading the currency market. Novice traders, however, commonly misunderstand how this can be done - largely due to misleading advertisements and sales schemes by Forex companies.
So, without any further ado, let’s get into clearing up some misconceptions regarding Forex trading as a source of income and how much capital would one need to deposit in their Forex account in order be able to generate an income from it.
Stop-loss trading orders are one of the most important parts of every forex trader’s strategy. Naturally, there are traders who are brave enough to trade without stop-loss orders or other kinds of capital protection, but it can be very hard for them to achieve stable results long-term.
The answer to the question “How much should I start with in Forex trading?” depends on several factors that we will explore in this article. But, first of all, one word of advice: Don’t be misled by the minimum deposits that you see on many brokers’ websites as part of their requirements to start trading.
One such possibility is investing in the strategies of experienced traders who trade for a living either on Forex or on other markets. But to be able to legally manage their clients’ funds, they must get the necessary authorization or licenses, which is not an easy task.
It's about settings, approaches, calculations, analyses that give us the answer to how much capital we can afford to lose in a concrete trading session and what the lowest ratio between profit and loss we need is, as far as money management goes, to keep the trading account's profitability.
For example, if you hold US Dollars, or if you are receiving payments in US Dollars while it’s not your domestic currency, then you are basically long the Dollar and you are exposed to the risk of it falling in value. If you own a house you are exposed to the risk of its price falling. Whether it’s a currency, real estate, a commodity or something else, if you hold it or own it there is a risk that its value may decline.
While most people will not think of ways to protect their assets or investments in such cases, businesses and professional investors are always thinking about this and are looking for ways to do so.
Do you disagree with ESMA about the restrictions on trading leverage in EU? Make your opinion count!
Volatility is something that is always present in markets, but many novice traders are not really aware of or don’t pay enough attention to. Yet, volatility is an absolutely crucial aspect of trading financial markets because when volatility changes the rules of the game usually change with it. Thus, very often new situations are created in the markets where what worked in the past doesn’t work now.
Operating on the foreign exchange market long term is the dream of many beginning and experienced traders. When traders get through the rough patch of starting out in Forex, they get more knowledge, experience, and abilities to get closer to their goal.
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