Millions of investors participate in the FX market daily as it can be a great way for them to make money. Before starting to trade in the markets however, traders should become familiar with how they can participate, the terminology used, and how it works.
This is the second part of our The Ultimate Beginners Guide for trading FX to get you going with investing in trading.
Leverage
Currency pairs are normally traded in “lots”, with a standard lot being 100,000 of the currency unit being traded. In order to simplify trading on Olymp Trade’s Platform, we don’t use “lots”.
Many investors would be priced out of the market due to the lots’ size as they don’t have capital of $1,000 to invest in a single trade, let alone $100,000. Brokers therefore allow investors to make use of leverage while making trades so that they can access the market and also to increase their profits.
Below are some examples where leverage was used versus making a trade by only using margin. In the first example, the market changes by only 1 pip, while the second example shows a change of 5%.
When an investor uses leverage properly, they can in a relatively short period of time make significant returns on their investments. This does of course come at an increased risk, both for the investor and for the broker that lends the money for leverage.
This challenged has been circumvented creative brokers that have implemented ways by which they can limit the risk to both the investor and themselves, while still being able to provide leverage for smaller investors.
Olymp Trade Helps You Turn Risk into Reward
By now you should have a good idea of what is involved in markets and how they work. It is now time to explore how you can trade in the market on your own terms to create financial independence for yourself. As always, Olymp Trade is there to help.
There are different ways in which new investors can mitigate the risks of investing in trading, while still being able to trade profitably by only using a small capital amount.
- Learn about the strategies you can use when trading fx
- Study how to read charts, use market analysis tools and how the spot market behaves
- Practice by using a “Demo Account” with a broker
- Learn what expert traders look for when they trade
- Set realistic goals and develop strategies to achieve them
Reduce Risks but Maximize Profits
Olymp Trade uses creative methods to help their clients getting the most out of their capital while at the same time providing them with tools to reduce their trading risk. The best features of Olymp Trade’ platform available to their clients are described below.
Trading Multipliers – Previously in this article, we showed an example of how leverage can be used to make a highly profitable trade with a small investment. This unfortunately comes with the risk that if the trade goes bad, the trader will owe the broker the leveraged amount.
To eliminate this risk, Olymp Trade enables traders to use leverage by utilizing multipliers of up to 500 times the amount invested on trades. Trades will however close automatically if the trade goes bad and the amount invested is lost. The image below shows how this works.
If the trade goes well, the profit is still the same as with leverage, but to protect traders, the position will close automatically when the invested amount is lost. This means the investor never has to be worried about owing Olymp Trade the leveraged amount if the trade goes bad.
The trader can also use the Olymp Trade “Stop Loss” tool to set an amount at which the position should close if it moves in the wrong direction. Although the Stop Loss tool is set to 50% by default, the trader can adjust it based on the level of risk they are willing to take.
On profitable trades, traders can also set their position to close automatically once a specified level of profit has been reached. Traders use the “Take Profit” tool to decide at what profitability level they are satisfied and want to close the trade. Once this has been set, they can stop monitoring the trade and be sure that when the position reaches their desired profitable, it will close automatically and the profit added to their account.
Traders gain more control over their positions by using a combination of take profit, stop loss, and multipliers. This allows them to be comfortable even if they can’t be at their computer or phone tracking the action firsthand.
Another benefit for Expert members at Olymp Trade is their ability to enter risk free trades a specific number of times per month. Although there are numerous advantages to Olymp Trade’s Expert program, the ability to cancel trades that have gone bad from time to time is a massive step in mitigating trading risks.
Use Tools to Gain Expertise and Knowledge in Trading
One of the key obstacles new investors face and that adds to the risk is a general lack of experience and knowledge of the market. There are fortunately several ways in which you can get the experience and education you’ll need to become successful in the market.
There are many different tools available on Olymp Trade to help traders reach their investment goals by trading on markets. These aren’t difficult for even beginners to use, providing they’re willing to take the time to gain experience and knowledge.
Some of the tools available include:
- Blogs and videos by experts on how to create your own charts
- Blog and video tutorials on how to interpret and analyze charts
- Experts providing online trading assistance on the platform in real time
- Customizable analytical tools for free
If you only take a few hours per week to build on your education, it can pay massive dividends in the future as you start building your portfolio.