NECESSITY OF EQUITY MANAGEMENT AND MARGIN CONTROL IN FOREX TRADING

     In recent times, I have had to question my mentor and gurus in forex trading why forex traders drained their margin within the short time of funding their accounts. The response I got from them was that, forex traders neglect the most important pursuit for a shadow of reality.

    It is a known fact that forex trading is highly risky but cannot be compared to the reward it offers and the wealth potentials it affords brilliant, smart, professional and diligent traders. Come to think of it, why is the business risky? It is simply because a forex trader is trading the currencies of nations of the world as a stock per seconds. The players involved in foreign exchange trading includes, Commercial Banks, Central Banks all over the world, Firms that realize foreign trade operations, Companies that realize depositing of foreign assets (Investment Funds, Money Market Funds, International Corporations), Currency brokerage firms, Physical bodies, and retail traders. The volume of liquidity it involves is massive and as such care must be taken to do things right.

     In my opinion I realized that ninety five percent of traders allowed their emotions to rule over them in active trade robbing them of sound ethical trading practice.

    Equity management and margin control is paramount for any forex trader who wants to succeed in this mega and ideal business, trading for living is feasible and greatly rewarding.

    Arguably, we know that emotions and instinct is a major driving force and a tool for accumulating financial dividends of forex trading but, there is a need for thorough strategic planning and strict compliance to a trading plan.

    Equity in forex trading entails a total sum, a forex trader have at a point in time he or she is trading or, when all positions are closed. The aim of a trader is simply to grow the equity through profiting. Planning is very crucial before a trade is executed.

    As a matter of fact a trader needs a good orientation of equity and margin control to protect and grow forex account. To make this happen, do the followings:

·        Factor what percentage of loss you can absorb per trade.

·        Apply stop loss order while trading.

·        Calculate your expected profit via risk to reward ratio analysis.

·    Size your lot per trade. This is the main threat to equity (trade volume), lot size will determine the margin used based on leverage selection.

·        Deal with the GREED.

 


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