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 Modupe Gbadeyanka
The federal government, the 36 states of the federation and the 774 local government areas have received N1.727 trillion from the Federal Accounts Allocation Committee (FAAC) for December 2024.
The funds were disbursed to the three tiers of government from the revenue generated by the nation in November 2024.
At the December meeting of FAAC held in Abuja, it was stated that the amount distributed comprised distributable statutory revenue of N455.354 billion, distributable Value Added Tax (VAT) revenue of N585.700 billion, Electronic Money Transfer Levy (EMTL) revenue of N15.046 billion and Exchange Difference revenue of N671.392 billion.
According to a statement signed on Friday by the Director of Press and Public Relations for FAAC, Mr Bawa Mokwa, the money generated last month was about N3.143 trillion, with N103.307 billion used for cost of collection and N1.312 trillion for transfers, interventions and refunds.
It was disclosed that gross statutory revenue of N1.827 trillion was received compared with the N1.336 trillion recorded a month earlier.
The statement said gross revenue of N628.972 billion was available from VAT versus N668.291 billion in the preceding month.
The organisation stated that last month, oil and gas royalty and CET levies recorded significant increases, while excise duty, VAT, import duty, Petroleum Profit Tax (PPT), Companies Income Tax (CIT) and EMTL decreased considerably.
As for the sharing, FAAC disclosed that from the N1.727 trillion, the central government got N581.856 billion, the states received N549.792 billion, the councils took N402.553 billion, while the benefiting states got N193.291 billion as 13 per cent derivation revenue.
From the N585.700 billion VAT earnings, the national government got N87.855 billion, the states received N292.850 billion and the local councils were given N204.995 billion.
Also, from the N455.354 billion distributable statutory revenue, the federal government was given N175.690 billion, the states got N89.113 billion, the local governments had N68.702 billion, and the benefiting states received N121.849 billion as 13 per cent derivation revenue.
In addition, from the N15.046 billion EMTL revenue, FAAC shared N2.257 billion to the federal government, disbursed N7.523 billion to the states and transferred N5.266 billion to the local councils.
Further, from the N671.392 billion Exchange Difference earnings, it gave central government N316.054 billion, the states N160.306 billion, the local government areas N123.590 billion, and the oil-producing states N71.442 billion as 13 per cent derivation revenue.
By Adedapo Adesanya
The NASD Over-the-Counter (OTC) Securities Exchange recorded a 0.65 per cent gain on Friday, December 13, boosted by three equities admitted on the trading platform.
On the last trading session of the week, Okitipupa Plc appreciated by N2.70 to settle at N29.74 per share versus Thursday’s closing price of N27.04 per share, FrieslandCampina Wamco Nigeria Plc added N2.49 to end the session at N42.85 per unit compared with the previous day’s N40.36 per unit, and Afriland Properties Plc gained 50 Kobo to close at N16.30 per share, in contrast to the preceding session’s N15.80 per share.
Consequently, the market capitalisation added N6.89 billion to settle at N1.062 trillion compared with the preceding day’s N1.055 trillion and the NASD Unlisted Security Index (NSI) gained 19.66 points to wrap the session at 3,032.16 points compared with 3,012.50 points recorded in the previous session.
Yesterday, the volume of securities traded by investors increased by 171.6 per cent to 1.2 million units from the 447,905 units recorded a day earlier, but the value of shares traded by the market participants declined by 19.3 per cent to N2.4 million from the N3.02 million achieved a day earlier, and the number of deals went down by 14.3 per cent to 18 deals from 21 deals.
At the close of business, Geo-Fluids Plc was the most active stock by volume on a year-to-date basis with a turnover of 1.7 billion units worth N3.9 billion, followed by Okitipupa Plc with the sale of 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with 297.3 million units sold for N5.3 million.
In the same vein, Aradel Holdings Plc remained the most active stock by value on a year-to-date basis with the sale of 108.7 million units for N89.2 billion, trailed by Okitipupa Plc with 752.2 million units valued at N7.8 billion, and Afriland Properties Plc with a turnover of 297.3 million units worth N5.3 billion.
By Adedapo Adesanya
The Naira appreciated further against the United States Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM) by N1.50 or 0.09 per cent to close at N1,533.00/$1 on Friday, December 13 versus the N1,534.50/$1 it was transacted on Thursday.
The local currency has continued to benefit from the Electronic Foreign Exchange Matching System (EFEMS) introduced by the Central Bank of Nigeria (CBN) this month.
The implementation of the forex system comes with diverse implications for all segments of the financial markets that deal with FX, including the rebound in the value of the Naira across markets.
The system instantly reflects data on all FX transactions conducted in the interbank market and approved by the CBN.
Market analysts say the publication of real-time prices and buy-sell orders data from this system has lent support to the Naira in the official market and tackled speculation.
In the official market yesterday, the domestic currency improved its value against the Pound Sterling by N12.58 to wrap the session at N1,942.19/£1 compared with the previous day’s N1,954.77/£1 and against the Euro, it gained N2.44 to close at N1,612.85/€1 versus Thursday’s closing price of N1,610.41/€1.
At the black market, the Nigerian Naira appreciated against the greenback on Friday by N30 to sell for N1,650/$1 compared with the preceding session’s value of N1,680/$1.
Meanwhile, the cryptocurrency market was largely positive as investors banked on recent signals, including fresh support from US President-elect, Mr Donald Trump, as well as interest rate cuts by the European Central Bank (ECB).
Ripple (XRP) added 7.3 per cent to sell at $2.49, Binance Coin (BNB) rose by 3.5 per cent to $728.28, Cardano (ADA) expanded by 2.4 per cent to trade at $1.11, Litecoin (LTC) increased by 2.3 per cent to $122.56, Bitcoin (BTC) gained 1.9 per cent to settle at $101,766.17, Dogecoin (DOGE) jumped by 1.2 per cent to $0.4064, Solana (SOL) soared by 0.7 per cent to $226.15 and Ethereum (ETH) advanced by 0.6 per cent to $3,925.35, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) remained unchanged at $1.00 each.
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