How do you calculate the risk and what do you need to know when choosing a broker you will find here …
How To Calculate risk?
The unit called “pip” indicates a change in the value of two currencies. Typically, one pip equals 0.0001 change in value. For example, if your traded EURUSD pair moves from 1,542 to 1,543, the value of your currency will increase by 10 pips.
The current EURUSD currency pair is 1.1619, which is equivalent to one EUR. Let’s say you think the euro will strengthen against the dollar, so you buy the EUR and you sell USD.
The shop itself looks like this: You need USD 146,100 (100,000 x 1.4619) to buy 100,000 euros. With a 50: 1 financial leverage, your deposit for this deal is only USD 2,923 (146,190 / 50). Your assumption has been fulfilled, the euro has strengthened against the dollar, and you decide to sell the euro at 1.4623 to receive $ 146,230.
What is your ultimate profit? You bought 100,000 units at 1.4619 for USD 146,190. Then you sold € 100,000 at odds of 1.4623, for which you earned $ 146,230. This is a difference of 4 pips, equivalent to a profit of $ 40 (146,190 $ – 146,230 $ = 40 $).
What do you need to know when choosing a broker?
– Try to find an organization that has been active in the business for at least ten years, so there is nothing new about it. Sufficient experience suggests that the broker knows what he is doing and he can properly take care of his client.
– At the same time, make sure that trading in this area is regulated by the appropriate supervisory body. If your broker voluntarily subordinates government supervision, you can be sure that his approach is fair and transparent enough. Of a number of similar supervisory bodies, we can mention:
USA: National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC)
United Kingdom: Financial Conduct Authority (FCA)
Australia: Australian Securities and Investment Commission (ASIC)
Switzerland: Swiss Federal Banking Commission (SFBC)
Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN)
France: Authorities des Marchés Financiers (AMF)
– Also note how many products your broker offers. If, for example, it deals with the sale of securities and commodities, it is obvious that its number of clients is larger and the scope of its trading wider.
– As far as reviews are concerned, it is good to read them, but to take a certain reservation. It is a fact that even the various scrupulous brokers will be able to publish a praiseworthy review to increase their reputation. The review fits like a flavor, not as a main course.
– Another appropriate step is to visit the broker’s website. They should look professional and individual lines should be active. If you see “Site in progres” notifications on your site or your appearance appears somewhat unprofessional, prefer to avoid such a broker.
– Do not forget to check how much a broker charges for brokerage. Find out how much your bank will say about transferring money to your form account.
– Focus on essential things. As a client, you need high-quality customer support, easy transactions and transparency. At the same time, you should not forget the reputation of the broker.