From Theory to Practice
And now it’s time to learn about the practical aspects of FOREX trading. In every professional area – and trading is not an exception - there is an indispensable set of tools. If you master the skill of using them, you are destined to succeed.
We have prepared this course in order to help you use the trader toolkit wisely. It will give you confidence and lead you to more profitable deals. Read on and gain the practical knowledge, essential for every FOREX trader!
First, meet the “Multiplier” – a beautiful tool, which provides extra leverage to your trading even with a minimum start investment. Basically, it is the broker giving the trader more money than is deposited in the account.
Suppose you open a 100-dollar position and use a “100” multiplier. It means that now your investment totals 10 000 dollars (100 times more than was actually invested), and it gives the same increase to your potential profits.
But be careful: if a multiplier is being used, the potential losses also grow at the same speed. This is where the risk management tools come into play – we’ll describe them a bit further.
At the very start, using a minimum multiplier will be the best option. In this way, you can remain on the safe side – keeping the unavoidable losses of a trader newbie within reasonable limits.
How do I set the FOREX Multiplier?
On the Olymp Trade FOREX platform, click on the numbers that appear to the right of the transaction amount. Please pay attention that 200, the maximum multiplier rate, is the default setting. Just click on the area “x200” and make the necessary changes.
Important note: When you first go to Olymp Trade FOREX platform, some of the options will be hidden – this is done for the sake of a more user-friendly interface. You can switch on these features, including the choice of a multiplier, in a few simple steps.
Click on the drop-down menu in the left upper side of the screen. Choose “Personal data” from the list which appears under your account number. You will see a window with your profile information and platform settings. Scroll down to find the necessary settings under the “Change password” button. Put a tick mark to the “Choice of Multiplier” and you are done! Now this feature is displayed on your platform.
Rules of the Road
Even though the multiplier accelerates both profit and loss, on the Olymp Trade FOREX platform you may not worry about finding yourself in debt. The broker constantly monitors the status of traders’ deals and has a stop-out feature. That will automatically close your position if the loss becomes equal to investment at some point. Like this, both you and the broker company will be better off.
Risk Management: Stop Loss order
On FOREX, a trader has 2 crucial points in time: having to decide when to open and when to close the deal. Luckily, there are some special tools which make this task easier. We are talking about risk management orders here – they close positions automatically, allowing the trader to relax a little bit.
Stop Loss is one of the orders in question. It protects you from major financial failure on the FOREX market, because you can fix in advance the maximum amount of money you are prepared to lose. If the price of an asset reaches that set parameter, trading in this position stops.
Setting the Stop Loss order
When you buy a currency pair (believing the price of an asset will rise), Stop Loss is set below the opening price level. This will protect you if the forecast does not prove right. When you sell a currency pair, Stop Loss is set above the opening price.
The Olymp Trade FOREX platform operates in such a way that your losses will never exceed deposits. The default Stop Loss parameter, so to speak, is always equal to the amount of your investment in any trade. But you are free to change this setting, if you want to define the maximum acceptable losses yourself.
On the other side, this order can be used to fix your profits. For instance, if your trade is in the profitable phase, you can move Stop Loss order to that area. A very convenient technique to get profits no matter where the price goes after a certain point.
Risk Management: Take Profit order
If you can preset the acceptable amount of your loss, the same must be true for profits. And it is. The Take Profit order in FOREX allows traders to lock in their profit by closing a deal automatically, after a predefined price level is reached.
On Olymp Trade FOREX platform you can apply the Take Profit order at any time - before and after opening a position.
Setting the Take Profit order
When you open a “buy” trade, the Take Profit order is set above the opening price level, for “sell” trades it is set below.
If you cannot keep a close eye on each movement of the chart, Take Profit is an excellent solution. You will be able to stay away from the monitor and get a guaranteed amount of profit, if the trend moves in a favourable direction. Also, when the trend changes too fast and you risk missing the most advantageous moment (technically), the preset Take Profit order will come into rescue and lock in your earnings.
The #1 Rule for all Risk Management Tools
Stop Loss and Take Profit orders are the very basics for every FOREX trader, and learning to handle them is vital for success.
Rules of the technical analysis connect setting of these orders to the key price levels. If the market is following a certain trend, pay attention to the support and resistance levels; if it’s in the flat phase - check the maximum and minimum price.
To learn more about the technical analysis, support and resistance levels and price maximums - please see our next courses!