1Market places the greatest importance on responsible trading from our users. As with many things in life, trading leveraged products such as CFDs incur a high level of risk and can result in the loss of an investor’s capital. This can lead to traders experiencing financial and emotional distress, and is a key reason why the principles of risk management should be carefully followed.
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Answer: Every time a trader enters the market, there is risk involved. In trading terms, risk is defined as the potential failure of an investment to meet an expected outcome or return.
Answer: Investors use stop-loss orders to essentially protect their profits. It specifies that a stock can be bought or sold when it reaches a certain price, known as the stop price. Once this price mark is met, the stop order becomes a market order and is usually executed at the nearest available opportunity.
Answer: A stop-loss order specifies a certain level which falls below the current market value, at which point the broker will close down the position automatically. While the trailing stop order is largely similar, it has a couple of subtle differences. Unlike the stop-loss order, the trailing stop order does not remain flat, but sees the stop price rise as the market price rises. Conversely, if the price declines, then the stop price stays the same.
Answer: Responsible trading refers to traders exercising control over their market moves and taking proper accountability for their own actions. It is also about acknowledging the risks involved with trading the markets, trading within financial means, and knowing when to stop.
Answer: In total, there are five key areas of a risk management framework that should be remembered. These are: Identification; Measurement; Mitigation; Reporting and Monitoring; Governance. Each of the five components should be followed in the correct order.
Answer: It is certainly the case that exotic currencies carry an added element of volatility, when compared with forex majors. They also tend to be engaged in longer-term downtrends against the main currency pairs. However, exotic currencies have the potential to offer much higher yields, with traders able to reap the rewards of decent payouts from them.
Answer: Trading without leverage is a viable option for many traders around the world. However, it must be noted that it requires a significant amount of capital investment to be able to do this. Indeed, this method can give traders a greater margin of safety and allows them to mostly survive losses. It is advisable to thoroughly research trading without leverage before commencing with this strategy.
Answer: The limit down price is the maximum permitted decline in the price of a stock or commodity over the course of a single trading day. Once such a level has been reached, market trading may then be restricted, in order to prevent a mass selling of stock or increased volatility.
Answer: Slippage is when there is a difference between the expected price of a trade and the actual price level that the trade was executed at. This scenario often occurs during periods of heightened volatility when market orders are used.
Answer: Leverage allows traders to fund trades with greater sums than their actual cash balance and is usually denoted by ratio. It involves the borrowing of money in order to control a larger position with a small amount of capital.