Understanding The Trading Risks Involved
In essence, trading on the financial markets involves the leveraged FX and CFDs products' margin trade. It is a high-risk process since the leverage can play either as an advantage or disadvantage of the traders. Both FX and CFDs are derivative financial instruments that enable speculating on the changing prices of a particular asset without actually owning the asset. However, trading with FX and CFDs carries a high risk level due to the instrument complexity and volatility and can lead to a significant capital loss. Therefore, traders/investors must be fully aware of all risks involved before stepping into the financial markets. Naturally, understanding the risks involved doesn't necessary mean traders will avoid the losses altogether. Still, they can make informed decisions and manage invested funds with more efficiency.
Here at Earnex, we understand the frustration that novice traders and investors can experience when coming across trading for the first time. To ease this process and provide them with a risk-free experience, we created Earnex Demo Account. It enables them to monitor and perform real-like trading strategies without the risk of capital loss. Earnex Demo Account is an excellent learning tool aimed to turn even the most inexperienced trader/investor into a knowledgeable professional. Visit our page where you can register for a demo account and start learning immediately.
Additionally, traders can benefit from other educational materials that aim to improve their risk management awareness. Earnex tutorials display different solutions based on the selected trading strategy and support both beginners and experienced traders' learning process.
What is leverage, and how to use it to your advantage?
Leverage is widely used in the financial market as it allows traders/investors to manage positions that surpass the value of their initial investment. For example: If a trader deposit ₤3,000 in their account and the trading is with a 1:30 leverage, their purchase power becomes ₤90,000.
When the market moves in traders' favour, the leverage allows them to maximise their profits. However, this is not always the case as the market can move to a hostile to the trader direction. In this case, the leverage will increase the capital loss.
Opening an Earnex Demo Account can help traders familiarise themselves with the principles of leverage and apply them to best suit their trading strategy. The Earnex Demo Account comes with a virtual balance that can be used risk-free.
Effective risk management methods
Successful trading depends extensively on well-applied risk management. Unfortunately, proper risk management is often neglected, and that could lead to significant capital loss.
Here are some essential tips to help you applied risk management successfully:
Always trade with amounts that you are comfortable with or you can afford to lose. Thus you will avoid unpleasant consequences if the instruments you’re trading with will move to a non-favourable direction.
Spread your risk by investing in various asset classes
Apply Stop Loss and Take Profit orders to decrease the possibility of losses.
Develop and apply trading strategies based on your research and knowledge of current economic and socio-political events that influence certain assets' price.
Trade Online with Earnex
Here at Earnex, we aim to facilitate your trading experience by providing you with a wide range of educational materials. You can explore various video tutorials, live webinars, technical analysis and the latest market news.
Earnex strives to provide you with an ultimate trading environment that enables you to maximise trading performance. Take advantage of our state-of-art trading platforms MT4 to select what best suits your requirements.