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Risk Analysis

Every investment is subject to risk due to potential unfavourable price changes.
As the financial markets constitute a complex system with many factors influencing the demand and supply at the same time, it is important to know that the result of practically any given transaction is uncertain.

The factors influencing the market prices are covered in the fundamental analysis section of our website.

Risk management depends very much on the types of assets the trader is interested in.
In this text we would like to discuss the tools that can be used in order to minimise potential losses resulting from adverse price changes.


4.

Make use of all the different orders available on the MetaTrader 5 platform

Stop-loss

Stop-loss orders are additional orders available for both pending orders and market orders. They can also be attached to already opened positions on a given market. These types of orders are the most basic orders designated for limiting the potential losses, for example when an investor is not able to follow prices all the time.

A trader establishes stop-loss levels by either specifying the level in points from the current price or by specifying an exact price level. For long positions, the stop-loss value must be lower than the current price.

For short positions, the stop-loss value must be higher than the current price.

Take-profit

Take profit is an additional order available for both pending orders and market orders. They can also be attached to already opened positions on a given market. The difference between this order and the stop-loss order is that in the take-profit order, a trader will fix the exact profit he wants to realise.

Sometimes, investors are not actually sure how much a price will continue its direction, so they fix a value for which a profit is guaranteed if the price reaches that level. For long positions, the take-profit level must be above the current price.

For short positions, the take-profit level must be lower than the current price.

Please obtain independent advice from an independent financial advisor if you have any doubts as to the instruments’ specifications and the market’s mechanisms.