{"id":14886,"date":"2010-11-07T04:44:18","date_gmt":"2010-11-07T09:44:18","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=14886"},"modified":"2010-11-07T04:44:18","modified_gmt":"2010-11-07T09:44:18","slug":"how-to-minimize-losses-in-the-forex-market","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/11\/07\/how-to-minimize-losses-in-the-forex-market\/","title":{"rendered":"How to minimize losses in the forex market"},"content":{"rendered":"<p><strong>Written by Emerging Market Capital FX (EMCFX.com)<\/strong><\/p>\n<p>What are margin requirements? A margin is a small deposit, which allows  you to leverage a large contract (unit or lot) size and all this will  depend on the clearinghouse. In the forex market, each clearinghouse has  one or multiple margin requirements. For example, 1% (100:1 ratio) or  2% (100:1 ratio) margin based on a $100,000 balance would either be  $1,000 margin or $2,000 margin. This means 1 unit is $1,000 margin or 5  units is $5,000 margin etc.<\/p>\n<p>What is the difference between balance and equity? Balance is the amount  that is fixed until any open positions or units are closed. The balance  would then either increase or decrease. Equity is the amount floating  that either increases (positive) or decreases (negative) during any open  position. In essence, equity is the balance minus the margin and  floating loss or profit. Some would say this is the true balance and is  the most important figure to be watched while trading.<\/p>\n<p>Below is a risk\/reward ratio comparison between 2 traders:<\/p>\n<p>Trader 1 has a $100,000 balance and has 7 units (1% margin) opened. His  balance will be fixed but the equity balance will be $93,000 with 7%  risk exposure.<\/p>\n<p>Trader 1 has a minimum 93% in floating equity. This would be considered a conservative trading strategy.<\/p>\n<p>Trader 2 has a $10,000 balance and has 7 units (1% margin) opened. His  balance will be fixed but the equity balance will be $3,000 with 70%  risk exposure.<\/p>\n<p>Trader 2 has a minimum 30% in floating equity and this would be consider  a high risk trading strategy since he has exposed more than half of his  equity in the market.<\/p>\n<p>Once a novice trader (80% of day traders) realizes his or her over  exposure, it is usually too late and is a hard lesson learned. For  prevention and awareness, a complete understanding of margin  requirements is required. Distinguishing equity versus the balance will  help minimize losses in the forex market.<\/p>\n<p>\u00a9 2010 EMCFX<\/p>\n<h3>About the Author<\/h3>\n<p>Mark Baker as one of the most dedicated and hard working  independent providers of forex managed funds to individuals from low to  high wealth portfolios. We offer transparent real time platforms for  peace of mind. Emerging Market Capital FX (EMCFX.com) can be your  alternative source for forex managed funds. Find out more about how to  minimize your losses in your portfolio and regain your wealth at  www.emcfx.com<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What are margin requirements? A margin is a small deposit, which allows you to leverage a large contract (unit or lot) size and all this will depend on the clearinghouse. In the forex market, each clearinghouse<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-14886","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/14886","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=14886"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/14886\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=14886"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=14886"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=14886"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}