As there is increased profit potential, there is alsoincreased loss potential. If you are not careful, your entire margin accountcould quickly be wiped out. If your margin account is 1% and the currency movesjust one cent against you, you lose $1000.
FOREX trading, however, has several methods to limit loss.Stop loss orders automatically close your position if the value of the currencycrosses a pre-determined point. Stop loss orders allow you to limit your lossesto a specified amount while still allowing potential profit taking.
An often overlooked risk is the possibility that your brokermay close your position if your potential losses approach the balance of yourmargin account. You may be riding out a down trend with the expectations of amarket reversal, but unless you replenish your margin account you may find yourposition has been closed. If this happens, you lose all of your margin.
FOREX trading, however, has several methods to limit loss.Stop loss orders automatically close your position if the value of the currencycrosses a pre-determined point. Stop loss orders allow you to limit your lossesto a specified amount while still allowing potential profit taking.
An often overlooked risk is the possibility that your brokermay close your position if your potential losses approach the balance of yourmargin account. You may be riding out a down trend with the expectations of amarket reversal, but unless you replenish your margin account you may find yourposition has been closed. If this happens, you lose all of your margin.
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