What is Forex?

An Unrealized Gain/Loss is the hypothetical gain or loss on a single Open Position, or on all Open Positions, valued at current market rates, as determined by the forex trader or by his broker to assess his outstanding risk.

The remaining rating is 8. If you are leveraged and you make a profit, your returns are magnified very quickly but, in the converse, losses will erode your account just as quickly too. If you continue to use the website, we assume that you agree to the use of cookies. Comment utiliser Forex pour la couverture 5.

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The difference between this cut-out point and where you enter the market is your risk. Psychologically, you must accept this risk upfront before you even take the trade. If you can accept the potential loss, and you are OK with it, then you can consider the trade further. If the loss will be too much for you to bear, then you must not take the trade or else you will be severely stressed and unable to be objective as your trade proceeds.

Since risk is the opposite side of the coin to reward, you should draw a second line in the sand, which is where, if the market trades to that point, you will move your original cut-out line to secure your position. This is known as sliding your stops. This second line is the price at which you break even if the market cuts you out at that point.

Once you are protected by a break-even stop, your risk has virtually been reduced to zero, as long as the market is very liquid and you know your trade will be executed at that price.

Make sure you understand the difference between stop orders , limit orders and market orders. Liquidity The next risk factor to study is liquidity. Liquidity means that there are a sufficient number of buyers and sellers at current prices to easily and efficiently take your trade. In the case of the forex markets, liquidity, at least in the major currencies , is never a problem.

However, this liquidity is not necessarily available to all brokers and is not the same in all currency pairs. It is really the broker liquidity that will affect you as a trader. Unless you trade directly with a large forex dealing bank, you most likely will need to rely on an online broker to hold your account and to execute your trades accordingly.

Questions relating to broker risk are beyond the scope of this article, but large, well-known and well capitalized brokers should be fine for most retail online traders, at least in terms of having sufficient liquidity to effectively execute your trade. Risk per Trade Another aspect of risk is determined by how much trading capital you have available.

Risk per trade should always be a small percentage of your total capital. This is an unlikely scenario if you have a proper system for stacking the odds in your favor. The way to measure risk per trade is by using your price chart. This is best demonstrated by looking at a chart as follows:.

We have already determined that our first line in the sand stop loss should be drawn where we would cut out of the position if the market traded to this level. The line is set at 1. To give the market a little room, I would set the stop loss to 1. A good place to enter the position would be at 1. The difference between this entry point and the exit point is therefore 50 pips.

Let's assume you are trading mini lots. Leverage The next big risk magnifier is leverage. Leverage is the use of the bank's or broker's money rather than the strict use of your own. This is a A one pip loss in a However, one of the big benefits of trading the spot forex markets is the availability of high leverage.

This high leverage is available because the market is so liquid that it is easy to cut out of a position very quickly and, therefore, easier compared with most other markets to manage leveraged positions. Leverage of course cuts two ways. If you are leveraged and you make a profit, your returns are magnified very quickly but, in the converse, losses will erode your account just as quickly too.

But of all the risks inherent in a trade, the hardest risk to manage, and by far the most common risk blamed for trader loss, is the bad habit patterns of the trader himself. All traders have to take responsibility for their own decisions. In trading, losses are part of the norm, so a trader must learn to accept losses as part of the process. Losses are not failures.

However, not taking a loss quickly is a failure of proper trade management.