A simple stop loss can save millions

Whatisforexrebate 4Browse 0Comments Collection

As forex forexrebatenetwork we must learn to keep our money safe at all times If there bestforexrebate such a clear example of why this is so important, you only have to look at the price fluctuations of the cashback forex franc in January 2015 to underst Whatisforexrebate Typically, the currency fluctuations of developed Western economies such as the US, UK and Eurozone do not exceed a few basis points per day and The reason one basis point is equivalent to only 0.01% volatility is What is forex rebate forex trading markets tend to be highly liquid and stable; they must be well organized to maintain the efficient functioning of such highly complex economies Because of the limited daily volatility, forex traders may want to use leverage to make their trades more valuable After all, $200 invested in a currency that fluctuates 0.03% from which Therefore, traders have the option of leverage of 50, 100, or even 500 to 1. Through this method, they can control larger amounts of money and get the best possible return on their investment. The problem with this approach is that the amount of leverage is used assuming that the conditions in the foreign exchange market remain the same for the most part, but when conditions change, the impact can be dramatic, as seen in the severe consequences of the volatility of the Swiss franc in January 2015 On January 15, 2015, the Swiss central bank announced that it was lifting the three-year limit on the exchange rate of the Swiss franc to the euro, which was completely unexpected by the financial markets Unexpectedly, because of this, the Swiss franc in the foreign exchange market in a matter of seconds soared not the usual 0.01-0.03% volatility, the Swiss franc at once soared more than 30%, which is really unprecedented rise, but also led to leveraged traders suffered huge losses use of stop loss did not set a stop loss leveraged traders because of the Swiss banks move suffered In fact, according to one broker, its customers closed the market that day with a total debt of about $225 million The impact of that consequence was not limited to individual traders, we also saw a number of well-known brokerage firms go bankrupt because of the volatility that day The sad truth is that if traders who lost large amounts of money had been able to use the oldest and simplest risk management would have A guaranteed stop loss below the market price would have saved them from a 30% swing and minimized their losses If they had set a stop loss, traders could have kept most of their money safe and made a comeback instead of watching their net worth suffer as the franc spiked We can learn from the huge shock in the Swiss franc but most importantly The important thing is that unexpected events will happen and the best precautions for traders i.e. risk control and guaranteed stop loss

Articles related to this article