Forex Trading

Top 5 Forex Trading Tips on Risk Management During Pandemic

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On March 11, the World Health Organization officially declared corona virus as a pandemic.

As directed by the authorities and other officials of public health, employees are now shifting to work remotely to comply with the prescription regarding social distancing and protocols on lockdown. Thus, there is potential exposure to the cyber security of company networks.

This pandemic has seriously impacted the business operations that could still affect even Covid-19 is contained.

There was also an exponential increase in the volatility within financial markets. To adjust to these unstable markets during this pandemic, it is essential to adapt your trade plan to connect to the broader range of price action.

Pull Out All the Stops:

Since the start of March, the norm for EUR/USD’s daily moves is between 100 to 300 pips. This is the plain condition of the forex market a few months back.

Forex Trading

The defending stop-loss command helps in avoiding too much losses and margin calls. It is important to use a risk management tool even under normal conditions of the market. Assuming distinguished volatility increase, placement of stop loss concerns many traders. Of course, widening stop distance is an option to facilitate in overcoming this, yet remember this also escalates the risk if the placement size is not accounted for. Modification may also be required when traders want to lessen the risk to breakeven.

In the volatility of markets, your positions need more space since the price moves several times before it settles in one direction.

Leverage:

In forex trading, leverage is mostly used by traders to maximize their profits. High leverage frequently results in higher gains. Still, trading is a two-sided coin that has equal increasing losses and gains. Thus, adjusting leverage for a wider movement of price market must be certainly considered by the traders.

Trade Duration:

This pandemic was a surprise to all. No one knew it would happen this year and would have an impact like this. Due to this, traders are really journeying through unfamiliar terrain. It is important to stay tuned to the news and monitor open positions. However, it is hard to track the positions 24/7 when you have limited access. That is the reason why a number of traders are liquidating positions before closing the trade every day.

Equity Risk:

Similar with leverage, forex traders will at the same time take into consideration trimming back and trade with lesser risk. This may not apply if you currently placed strict position-sizing rules.

If you now risk 3-5% of your equity account every trade, you may consider abiding by 1-2%. However, it still depends on the amount of risk you are comfortable with.

Orders:

There are two types of orders executed in the forex market. A limit order is used when the limit of price is met, while a market order is directly used at current prices. Since limit orders are not prompted without the conditions being met, they are applicable tools to benefit the traders and protect them from volatility. Another advantage is the capacity to use numerous trades at once in various markets when opportunities surface.

Covid-19 has dramatic impacts on financial markets. Thus, it is very important to track your strategies for risk-management that will fit this challenging forex trading environment.

Patricia

Patricia

Hurray! By means of breaking the stereotype, Patricia has start-up the business and doing successfully on this. She is here to enlighten others by conveying some tricks on succeeding in the business thereafter.

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