Forex traders – from novices to experts – make several mistakes everyday that are relevant to a trade. The difference between a successful broker and a jobless one is that the mistakes made by the former are manageable, excusable and never repeated while the mistakes by the latter are fundamental, inexcusable, and made repeatedly. This article will discuss how a margin calculator can minimize mistakes and maximize profits.
Availability of Capital
Forex trading allows the investor to leverage their actual investments with that of a margin account. The problem is not every trader understands the significance of one’s margin. On one hand, an investor does not realize that the margin account allows him to leverage amounts on a 1:100 basis. On the other hand, an investor overshoots the margin account or fails to properly compute the thresholds required by legislature. The first instance results in slow moving investments. The second instance results in margin calls, penalties, or forced sale. Proper understanding and utilization of a margin calculator can minimize the occurrence of both instances resulting in a more rounded Forex trade.
Predicting with a Personal Crystal Ball
Some traders or newbie traders sometimes get overconfident after getting a few trades right and earning a few points for themselves and/or their clients. As a result, they believe they can figure out a trend by line of sight even before or contrary to several indicators. What is worst is that they not only trade on the blind but also trade in huge lots without a proper stop loss order. This results in substantial losses of investments and/or hard-earned savings. Using a margin calculator grounds traders to reality and to the figures that can be lost when making foolish predictions. This is sometimes a significant wake-up call to stop or limit baseless trading.
Most beginners make this mistake. They are excited to enter the trades that they play with several currency pairs and use advanced strategies at the get go. What is worst is that in some cases the potential total margin loss is not even computed, hence a significant loss may mean that the investor has no sufficient savings to cover the entire amount lost. Over eager trading is not really a bad thing and more often than not this bid to get into several trades will result in losses. However, this serves as a priceless lesson to traders early on in the game. That is if they still have the ability to get back in the game after the margin account losses have been tallied. Using a margin calculator provides traders with an exact figure of what could be lost, hence allow them sufficient time to come up with the funds or back down on excessive trades.
A stop is not merely an order to minimize losses; it is also an order to stay put and preserve the status quo or exit the game with profits in tow. By utilizing a margin calculator, a trader will be able to determine if he can still afford to continue with a trade or issue a stop loss order. At the very least, he will be given a heads up of potential income and potential losses.