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Risk Management

Forex and CFD The volatility of the CFD market magnifies trading opportunities, giving traders the opportunity to take advantage of price volatility to generate revenue. However, there are always situations in which transactions and assumptions run counter to one another, leading to losses.

Losses are common to most traders, and even the best traders can't avoid losses, so becoming a successful trader is the key to controlling risk.

For Forex and CFD CFDs, there are many ways to manage risk:

  • Reduce leverage (improve margin requirements)

  • Draft a trading plan and implement it resolutely

  • Always pay attention to the latest market conditions

  • Use fundamentals and technical analysis

  • Know when you should close your position and accept the loss

  • Manage risk using trading tools including stop orders

Understand the risks posed by leverage

As the most direct way to manage risk, you can reduce the leverage of highly leveraged financial products, such as major currency pairs, to below 50:1 (ie 2% margin requirement). Leverage reduction can significantly reduce the risk to the exchange, As a result, the potential risks to the total assets are correspondingly reduced. (Note: The leverage can only be modified before the position of the product is established).

Develop a trading strategy that suits you

As a trader, having a trading strategy that suits you is critical, allowing you to identify profitable trades, maximize profits and minimize losses in adverse situations.

First, you need to control the amount of each transaction based on your funding status and level of experience.

Second, technical analysis and fundamental analysis are trading techniques that traders often use in the Forex and CFD markets. Technical analysis is the observation of historical price data to predict future price trends. Fundamental analysis is another case of observing the core factors that are more rigorously assessed that may affect the needs of something.

In Forex and CFD CFD trading, all available data is gathered to help measure the strengths of a particular product. For example, fundamental analysis focuses on the release of important economic data and reports, such as unemployment and GDP data, interest rate announcements, production data, etc. to determine the future direction of a country's currency.

When you have no time to take care of your position, Please make sure you have used the closing order to reduce risk and manage your position. There are two main types of closing orders: Stop Loss and Limit.

A stop-loss order is an order placed by a customer to close an existing trade at a price that is more unfavorable than the current market price, with the aim of reducing losses. This is the most frequently used tool for Forex and CFD CFD traders to manage risk. When the market reaches the stop loss level you set, your trade will automatically close the position before the loss increases, minimizing the losses you may encounter.

For example, if you have already made more EUR/GBP at 0.8850, you want to reduce the possible losses when the cross currency pair price drops to 0.8790, so you will open a stop loss order at 0.8790 and lose 60 points. This means that when the market is not good for you, you limit your risk to 60 points.

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