Economy
How to Control the Risks in Trading?
Risk control is one of the dominant aspects to consider when trading. Of course, if you choose to trade with Exness MT4, the risks get reduced to a minimum. In any case, let’s cast a look at the key steps to take to minimize the risks and calculate their probability when you get into trading.
What’s Risk in Trading and Why You’d Control It Every Second
A trading risk (aka risk in trading) is presented by certain events in the forex market, to subsequently negatively affect the trader.
There may be some changes in the exchange that will ultimately lead to a loss of money.
There are strategies in the forex market that are based on risk management.
Risk at forex trading can be calculated using the following formulas. There are certain formulas and rules for determining risks, for example:
Risk per Trade = Purchase Cost — Stop
And this is the formula for calculating the risk for all trading capital, expressed as a percentage:
Risk = Expected losses in the trade / Equity x 100
This formula will help you comply with the basic rule of risk management, which allows you to risk no more than 2% of your trading capital (or portfolio) per trade.
Risk management is primarily a process of preliminary analysis of all transactions for possible risk and potential profit.
Before making a deal on the stock market (opening a position), the fundamental condition is to determine the risk arising from this.
Control over the risks, or simply risk management, largely determines the likelihood of a trader’s trading success in general, since it allows a competent approach to opening and maintaining positions under risk conditions.
Often, it is precisely the optimization of a position based on the level of risk that is acceptable for a trader that is the main criterion for successful trading.
Frequently, newbies, having no idea about risk management, overestimate the risks and lose their deposit, which often ends in frustration in trading.
Also, without working with risk management, it is extremely difficult to create a successful trading strategy.
Watch News and Stay up to Date
Being guided by fundamental analysis or simply watching news and staying up to date news plays the role of a ’fulcrum’:
- Following the publication of macroeconomic indicators
- Statements of the largest international and
- National financial organizations,
a trader is able to predict a decrease or increase in the rate of a particular currency. This is how all forex professionals work.
But even if a trader is not going to become a professional, he may well define for himself several sources of information that he will use to stay in the know.
The formula for success in the forex market is quite simple. To be in profit, it is necessary to
- Correctly interpret the information received
- Draw the correct conclusions from it, and
- React correctly by opening certain deals.
There are several basic information flows that a trader can use. The most convenient help is the financial news feed, which is equipped with all major online trading platforms.
As a rule, on this tape the specialists of the brokerage company or their partners—business news agencies post in real time all the news that are important for the Forex market.
Stay Stick to the Plan According to Budget
Sticking to the budget you planned is actually one of the fundamental parts of the control over your risks at the forex market.
There are several universal tips for applying risk management in trading that can help improve the trading efficiency of a trader who uses them correctly:
- Before starting trading, it is necessary to draw up a trading plan that describes in detail the trader’s behavior during the trading day, which helps to partially neutralize the emotional component of trading.
- Use only strong signals in trading. You shouldn’t try to trade from a reversal on every random correction.
- It is necessary to limit your losses in each trade and plan the expected profit using stop and take profit orders.
- Do not overexpose losing positions. Stop orders not only help to close a losing trade on time, they are also a kind of indicator of the correctness of the forecast. If the forecast has obviously not been confirmed, one cannot hope for a price rollback over time, otherwise one can get into the opposite trend position and lose the entire deposit.
- Do not try to trade aggressively, especially if you have no experience. It is not by chance that professional traders choose the risk threshold for a transaction at the level of 2% of the deposit—it is best to stick to it until you gain a certain experience in trading.
Each of the tips listed above is applied to the way you distribute your budget in the process of trading. Thus, planning your budget is paramount.
Take Profit-Stop Loss Points
A successful trading system consists of two parts:
- The first is the loss limitation, and
- The second one is the timely profit taking.
Sometimes traders’ strategies assume a strict ratio of the length of positions such as stop and take profit, for example, 1 to 3. Thus, a stop of 10 points will have a take profit of 30.
The ratio can be any, but you should not set too long take profits without a good reason—often the overestimation of price drivers leads to the fact that the trader does not record a solid profit, and the reversal occurs before reaching a long take.
At the same time, it should be remembered that in this case, the take profit must necessarily exceed the stop, since a rare strategy allows a trader to trade without losses, and short stops suggest that, for example, two losing trades can be compensated by one profitable one.
However, in many strategies, the exit point is determined in a different way. Signal trading is one example.
In accordance with this strategy, a trader enters a position by a signal and expects a return signal to exit. In such strategies, the ratio of possible profit and loss is quite large, since the price often passes a significant number of points before reaching the opposite signal.
However, this position has a significant disadvantage: sometimes the return signal is not received at all.
Another strategy involves placing profits near resistance levels, where the likelihood of a reversal is very high. Most often, this option is preferred by experienced traders who are able to correctly determine the levels.
Exnessgroup wishes you successful trading in 2022!
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange weakened by 0.22 per cent on Tuesday, April 28, with the market capitalisation down by N4.8 billion to N2.420 trillion from N2.425 trillion, and the NASD Unlisted Security Index (NSI) down by 9.01 points to 4,044.96 points from 4,053.97 points.
During the session, the price of Central Securities Clearing System (CSCS) Plc went down by N1.82 to N767.05 per share from N78.87 per share, while FrieslandCampina Wamco Nigeria Plc appreciated by N1.90 to N100.00 per unit from N98.10 per unit.
According to data, the value of trades increased by 265.7 per cent to N27.1 million from N7.4 million units, and the volume of transactions surged by 305.2 per cent to 1.3 million units from 319,831 units, while the number of deals decreased by 6.9 per cent to 27 deals from 29 deals.
Great Nigeria Insurance (GNI) Plc remained the most traded stock by value on a year-to-date basis, with the sale of 3.4 billion units valued at N8.4 billion, followed by CSCS Plc with 59.8 million units exchanged for N4.0 billion, and Okitipupa Plc with 27.8 million units traded for N1.9 billion.
GNI Plc also finished as the most traded stock by volume on a year-to-date basis, with a turnover of 3.4 billion units worth N8.4 billion, trailed by Resourcery Plc with 1.1 billion units transacted for N415.7 million, and Infrastructure Guarantee Credit Plc with 400 million units sold for N1.2 billion.
By Adedapo Adesanya
Pressure is beginning to mount on the Nigerian Naira in the different segments of the foreign exchange (FX) market despite an oil windfall triggered by the Middle East crisis.
On Monday, April 27, the domestic currency further weakened against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) by N16.47 or 1.2 per cent to N1,380.71/$1 from the previous day’s N1,364.24/$1.
It was not different against the Pound Sterling in the same market window, as it lost N16.04 to trade at N1,863.76/£1 versus Monday’s closing rate of N1,847.72/£1, and against the Euro, it slipped by N12.72 to close at N1,615.01/€1 versus N1,602.29/€1.
The Naira also depreciated against the Dollar at the black market yesterday by N5 to quote at N1,390/$1 compared with the previous price of N1,385, and at the GTBank forex counter, it further crashed by N9 to settle at N1,379/$1 compared with the preceding session’s N1,370/$1.
The continued decline of the Naira comes as traders increasingly seek other safe-haven currencies amid continued global disruptions.
The benefit awash in the global market is making foreign portfolio investors stay short in Nigerian markets. Despite this, the daily FX publication released showed that interbank turnover rose to $98.829 million across 78 deals, up from $76.65 million.
Meanwhile, the cryptocurrency market remained cautious, with Bitcoin (BTC) trading at $77,216.66 despite surging oil prices and geopolitical tensions over a potential extended US naval blockade of the Strait of Hormuz.
Analysts say the supply overhang has finally dried up, and the sellers who were spooked by macro shifts or quantum fears have already exited, leaving the market much thinner on the sell-side.
Investors will await decisions made by central banks this week. The US Federal Reserve will announce its rate decision later on Wednesday, while the European Central Bank (ECB) follows on Thursday.
Ethereum (ETH) gained 1.5 per cent to trade at $2,324.59, Dogecoin (DOGE) chalked up 1.4 per cent to sell for $0.1016, Solana (SOL) appreciated by 0.6 per cent to $84.85, Cardano (ADA) grew by 0.5 per cent to $0.2483, and Binance Coin (BNB) advanced by 0.2 per cent to $627.15.
However, TRON (TRX) depreciated by 0.6 per cent to $0.3224, and Ripple (XRP) lost 0.03 per cent to sell at $1.39, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) were unchanged at $1.00 each.
By Adedapo Adesanya
Oil was up by nearly 3 per cent on Tuesday as persistent worries about supply constraints from the closed Strait of Hormuz continued, with Brent futures for June rising by $3.03 or 2.8 per cent to $111.26 a barrel, and the US West Texas Intermediate (WTI) crude futures growing by $3.56 or 3.7 per cent to $99.93 a barrel.
An earlier round of negotiations between the United States and Iran collapsed last week after face-to-face talks failed.
Ship-tracking data showed significant disruptions in the region, with six Iranian oil tankers forced to turn back due to the US blockade, but some traffic is still moving.
Prices trimmed some of the advances after the United Arab Emirates (UAE), the fourth-largest producer in the Organisation of the Petroleum Exporting Countries (OPEC), said on Tuesday it would exit the group on this Friday, May 1, 2026.
This dealt a blow to the oil-exporting group and its de facto leader, Saudi Arabia.
The UAE could quickly add between 1 million and 1.5 million barrels per day of output. However, with the Strait of Hormuz effectively closed, analysts said that there’s nowhere for that supply to go.
The UAE joined OPEC in 1967, but tension with Saudi Arabia over production quotas has been building for years.
Under the OPEC+ deal, the country has been held to roughly 3 million barrels per day while sitting on capacity above 4 million. It has been pushing toward 5 million barrels per day by 2027, and that target is hard to achieve with quotas built around someone else’s view of the market.
The war in Yemen broke whatever was left of diplomatic patience.
President Donald Trump said he was unhappy with the latest Iranian proposal to end the war. The proposal would avoid addressing the nuclear programme until hostilities cease and Gulf shipping disputes are resolved.
The Idemitsu Maru, a Panama-flagged tanker carrying 2 million barrels of Saudi oil, and an LNG tanker managed by the Abu Dhabi National Oil Company (ADNOC) crossed the Strait on Tuesday, shipping data showed.
Vortexa data showed that the amount of crude oil held around the world on tankers that have been stationary for at least seven days rose to 153.11 million barrels as of April 24.
The American Petroleum Institute (API) estimated that crude oil inventories in the United States fell by 1.79 million barrels in the week ending April 24. The official data from the US Energy Information Administration (EIA) will be released later on Wednesday.
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