Risk Management Techniques

Risk Management

With some brokerage accounts, leverage can greatly increase your returns and losses. If your $ 1,000 account invests in a share with a 75% leverage ratio, we'll give you $ 4,000 worth of shares, and a 25% drop in the stock price will mean losing $ 1,000. Any further fall occurs when the broker funds. This is a high risk game. A quick tip is to divide the added% by 25% (eg 25% as above), which gives you 4 steps of the 4th share price (eg 10%) 4 times (currently 40%

Risk Management Tip 1 – Leverage Rate

The most important thing before risk is risk management. First decide how much you are willing to lose (say $ 1000) and what percentage of your account is (or 25%), you can invest $ 4000 each without lending, and you will lose if you lose 25% or $ 1000. If you have a hedge loan (75% leverage ratio), you would still cost $ 1,000 to just $ 1,000 money is used and the remaining $ 3000 is in cash on the trading account. The same applies to higher leverage ratios (eg Forex trading) and this method ensures that you never invest more than you originally Never spend $ 1000 on a 75% leverage ratio ($ 4,000 in investment), then with the 99.5% leverage ratio of the same rate ($ 200,000), as this loss is spiraling out of control. This technique means that you can use your account as if there were no leverage (hold lots of cash in cash) but take advantage of the ability to sell and sell a wide range of assets with an online CFD trading account.

Risk Management Tip 2 – Stop Loss Order

Each order must be accompanied by a "stop loss" order, which means that when a certain loss occurs. Decide that the biggest thing you lose is, and if you hit the stop, do not reposition the position. Trust in you that you were wrong, not on the market, and you move on. Although stop loss protects you from price movements during the trading day, it can not protect you from the "risk of the gap", which moves in the wrong direction when the market (especially the stock market) opens the next day. A bigger move to overseas markets, which means that it opens 1% +, so any normal stop loss will close the open position (down by 1%), even if it wants to break down the trade by 0.25% (the market dropped by 0.25% and jumped straight to a 1% drop, which means the broker knew the best price was 1% down). It's been four times bigger than you've been planning, and this is the only way to avoid this, a guaranteed stop loss order.

Risk Management Tip 3 – Guaranteed stop loss order

Guaranteed shutdown cost requires more, but it must be taken into account when a device fluctuates and where the market is not open in part of the day (ie stock market). If you give the maximum loss level, you guarantee that the broker, even if the market is 1% lower, will lose 0.25% and the broker will bear the other 0.75%. Their work is intended to cover the books and thereby offsets the fee paid for the use of guaranteed stop loss. This type of assignment is more useful for short term traders than for longer-term investors, but should be part of the arsenal of all market participants

. These two types of stop loss orders should always be used to prevent losses beyond what they are prepared for and are essential for successful trading and investment.

Source by sbobet

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