Best Risk Management Tools

Most traders who have been in the game for so long credit their success to proper risk management. This is what separates real traders from gamblers who may have struck huge wins but are unable to maintain consistent profitability.

A few important aspects of risk management include stop loss placement, position sizing, reward-to-risk ratios, and incorporating other fees such as spreads or transactions costs. All these factor into a trader's account balance and win rate.

dealCancellation risk management feature

Stop losses may are your best friends when it comes to limiting your trading losses, and these come in various forms such as equity stops, time stops, and technical stops. In using stop losses, you are already specifying how much of your account is being risked on a trade, how long you plan on keeping a part of your capital locked up in an open position, and which technical levels may determine if your idea has been invalidated.

Putting all these together, say having a 1% risk of your account on a trade and an invalidation point of 200 pips away from your entry price, will allow you to determine your position size for that particular trade. However, if you don't have time to make these computations yourself, easyMarkets offers guaranteed stop losses that enable you to limit your loss without worrying about slippage. This comes in pretty handy during volatile market hours or when black swan events take place, protecting you from having a negative account balance at no additional cost.

Another handy risk management tool provided by easyMarkets is its dealCancellation feature, which gives the trader the right to cancel the trade up to the expiration time. These are offered on most securities unless otherwise specified and can be activated by simply sliding the dealCancellation to the On position. This means that you can further limit your losses on a potential losing trade as long as it is covered by the dealCancellation period of 60 minutes.

Fees associated with this dealCancellation feature can vary depending on the security, position size, and market conditions but the costs are already disclosed before you activate it. When you've canceled the deal, the amount you've risked will be returned to your account and the fees charged, possibly allowing you to incur a smaller loss compared to getting stopped out.

Lastly, calculating profit or loss also incorporates the spread and other transaction fees that may have been incurred. Bear in mind that some spreads can widen during volatile market situations, reducing profitability or increasing losses. However, for brokers such as easyMarkets that offers fixed spreads, you may be able to factor these costs in from the get-go, without having to worry about additional costs being charged.

These spreads can easily be referred to in the easyMarkets forex spread and Pricing Table, which also includes the contract sizes for each instrument and the pip values, as well as the minimum margin required. This may be helpful in position size calculations and ensures broker transparency in that no other fees will be applied.

deal protected with dealCancellation


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