Risk Management Orders

Volatility in Forex markets has always successfully brought opportunity to speculate and from it profit from the price movements. That being said there is always the possibility that your trades may go against you while incurring you a net loss.

Losses are not an uncommon thing for Forex traders, no matter how experienced they may be. The secret to becoming a successful trader is to manage risks affectively. As a Forex trader, there are tons of things that you can do to raise your profit potential and cut down on risks:

Understand the risks that are involved when it comes to Leveraged Forex trading

  •  Create a trading plan
  • Make use of technical analysis in your strategy
  • Know when you should trade and take a loss
  • Use trading tools like stop orders that would manage risk

There are two types of closing orders: Limits and Stops.

Forex Stop Loss With The Use of An Existing Trade

Forexray offers Forex Stop Loss Orders that are free of charge. These are used to close out existing trades when the price moves to a level that is worse than the price at entry level. You get to set a stop level and when the market reaches that level the trade is closed automatically. This cuts away your losses before you incur any more.  That being said, Stop Losses do not guarantee 100 percent risk protection.

Through market volatility your trade can sometimes be closed out at a level that is different to your stop level. This is a result of slippage or what is referred to as gapping. This can only take place when market prices show a wide gap between consecutive prices, without trading ever taken place around the time of the change in levels.

If market gaps through the stop level you set, the closing price can easily differ. The trade is closed at the best available price.

Take the USD/CAD example for instance. If for example you bought 10,000 USD on this currency pair at 1.6284, you specified 1.6224 as the stop level you prefer, which falls 60 pips under the current price level.  Now unluckily certain bad retail sales figures force USD/CAD lower than your position which is automatically closed out around the time at 1.6224. Your loss is then limited to USD 10,000 x 0.0060= $60.

Also note that in rare cases, order slippage may happen. This is where market gaps down and trades under the stop level you have set, also it never trades at your stop level. In this case, your trade is filed at the very next tradable price that is available.

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