Algorithmic trading: advantages and disadvantages.

 Algorithmic trading

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Algorithm complexity

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Leverage (Finance)

Most forex quotes move by less than 1% per day, but this small volatility is offset by the leverage that allows you to profit from relatively small price changes. Risks with high leverage also increase in proportion to the potential profit.

Forex trading is carried out on the principle of margin trading, so the nominal size of an investor's open position can significantly exceed the account balance. Forex brokers offer their clients maximum leverage (1:50 and 1: 100). If you choose 1: 100 leverage to open a position, the trader must have at least 1% of the total risk. Trader's positions are automatically closed when the current account balance falls below the amount required to maintain the position.

Do not listen to rumors and opinions of experts, which basically coincide. Such rumors only confuse the trader and do not allow them to make money. Remember: if a person is a specialist and can easily predict the exchange rate, he will not post on the Internet, but will occupy the position of the head of the investment department of a large company or simply make millions.

The more leverage and the more often you trade, the faster your account will be reset.

According to statistics, the average European Forex client loses money within three months. The statistics of the national American regulator NFA states that for the quarter period about 70% of clients of licensed US Forex brokers lead to losses and only 30% - to profits. Is it possible to be in these 30% and why is there such a difference in the statistics of the American and European regulators?

The reasons for the loss of clients' money when trading at exchange rates can be of several types: due to the nature of the instrument (fundamental reasons), lack of proper experience if a trader is a beginner, and due to banal fraud when a firm, providing services to the client does not fulfill its obligations properly.

Money Management Rules

Use a trailing stop, which is a useful stop loss function that automatically moves an established stop order according to market movement. Trailing stop works on the trader's side and only when the trading terminal is connected to the counterparty's server. In other cases, stop loss is used.

Stop Loss is an order that helps to reduce a trader's loss if the price of a currency pair moves in a direction unfavorable for a market participant. If the price reaches the level at which the stop loss is set, the trade is closed automatically.

- Setting stop orders. Stop orders are placed by a trader in case of force majeure, such as the absence of a trader at the right time, sudden movements during a news release, etc. In this case, this complex of measures can save the trader's deposit from significant drawdowns. The size of the stop loss is determined by the trader depending on how much the trader is willing to lose in one trade.

The higher the market volatility, the further from the current price the stop order should be placed.

- The amount of the invested funds should not exceed 5% - 30% of the total amount. This will allow you to continue trading and stay in the "comfort zone". A trader should take it as a rule: not to make transactions that can lead to losses, trading amounts no more than 5-10% of the deposit;

- The ratio of possible profit to loss. For each trade, the trader needs to determine the level of losses, as well as the level of expected profit. These levels need to be determined prior to entering into a trade. As a rule, the expected level of income from each trade should cover the possible losses by 2-3 times. Only in this case a trader can conduct a successful deal.

How much you can earn in Forex

How much you can earn in the Forex market is the main question for those who are just mastering their trading. But there are still no exact answers to this question. Everything largely depends on the circumstances: market conditions, trader skills, the amount of the deposit, the accuracy of the analysis and many other important factors.

Internationally, professional asset managers representing various investment funds have an average annual return per dollar invested of 15-20%. 30-40% of them are the most successful. These numbers can be seen as a goal for the trader to understand how much profit can be made.

Profitability factors

Deposit amount. The size of the deposit is a very important factor limiting the trader's ability to make money on Forex. 30% of the profit from trading on the EUR / USD pair from $ 100 or $ 1000 will be $ 30 and $ 300, respectively. Therefore, it is logical to assume: if a trader is really going to live on the money earned on Forex, then he must have a certain initial deposit, which, taking into account the average market yield, will be able to satisfy his needs. for earnings.

In addition, the risks of trading with small amounts of deposit are high, and a sufficient size of the deposit allows you to reduce trading risks. Due to the small amount of the deposit, traders are often forced to abandon interesting and profitable trades, as there are risks of losing the entire deposit.

A good market situation and sufficient start-up capital will not save a trader from losses if he trades unreasonably and does not take into account the available balance. Therefore, each trader must develop his own trading strategy and adhere to it, which will allow controlling risks and avoiding unnecessary losses.

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