Many active traders are not quite serious about MM (capital management) and leverage during trading
Forex trading can be carried out by different methods, which in general can equally justify themselves. It all depends on the correct application. This is a conservative and aggressive trade in terms of possible risks. The difference between these strategies is only in the amount of leverage and the use of inflated trading volumes.
Forex traders may decide that an aggressive approach to trading is more advantageous, but this is not really the case. In the long run, just conservative trade gives a more tangible income. Why is that?
It is worth considering the work of each type of trade. Let’s start with aggressive. Aggressive trading (trading system) is the use of large trading volumes, or trading with a high frequency of opening and closing trading positions. It also applies the method of increasing the trading volume while reducing the size of the deposit.
As you can see, this trading system fully justifies its name. And this is the biggest disadvantage of this type of trade. Namely:
– working with aggressive trading systems requires high emotional stress and not every trader is able in this state to adequately perceive and process information. And this can lead to a lot of mistakes, through a lot of stress. So it will be almost impossible to make money on forex, unless you have nerves of steel.
– Oddly enough, but working with aggressive trading systems, you actually have very few opportunities to manage trading positions. When working with high trading volumes, you cannot set grid limit orders to eliminate, because this can lead to a loss of deposit. The use of locks, or locks, can also entail the loss of a deposit account. It is also impossible to work in the money management system without the use of stop-loss, because in this case the deposit will be lost.
– At the time of the release of strong news aggressive trading also succumbs. Spreads may be extended. It will be difficult to modify the order, or open / close it. Moreover, in conditions of panic and confusion, the trader will simply lose his vigilance and ability to calmly assess the situation. So the loss and loss of the deposit is almost guaranteed.
– In most cases, using an aggressive trading system is possible only in intraday trading.
And how to make money on forex with the help of conservative trading systems?
In this case, the pressure on the psyche of the trader is insignificant, which allows for a more balanced and deliberate conduct of the transaction, which significantly reduces the risk and raises the profitability of the transactions. What is the advantage of a conservative trading system?
– In conservative trading systems, trading takes place in a calmer rhythm. It is possible to weigh each market fluctuations in a balanced way and stick to their established strategy.
In the event of any unforeseen changes, it is very easy to get out of the situation by making a deliberate and correct decision. In such systems, limit orders are used.
– Here you can resort to various auxiliary tools, such as: averaging, working on overlapping the locus with the resulting volume. With a conservative trading system, you will work with low trading volumes, which means that if you use these tools incorrectly, you can not be afraid of losing the entire deposit in one fell swoop. With this strategy, you can easily afford to hold a position close to the last moment or work with locks.
– In the case of strong news, too, do not panic. Most of these trading systems are medium-term with pending orders.
Thus, conservative systems allow you to get a stable income for months. Of course, here you will not get a solid profit in one fell swoop, but for that (you) you will have it, although not big. And those traders who do not chase after crazy money, but are methodically working to increase their capital, have every chance of making good money with the help of conservative systems.
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