Forex

1. Equity Stop-
In all of the stops this stop is very simple risk of the trader is determined before trading this amount is only the amount of his / her account or single trade. With the help of a common metric we can know easily that this risk is only 2% of any account on any given transaction. Means on a transaction of $10,000 a trader can have the risk of $200 only or 200 points.


There are many violent traders in the market who may consider using 5% equity stops but this amount does not consider the upper limit because if that person is wrong for regular ten times then he would get a loss of 50% that is a huge amount.

2. Chart Stop
If we analysis it technical we can find a lots of stops there which are driven by the price action of the chart or by various indicator signals technically. There are many technically oriented traders in the market who loves to mix these exit points with the regular equity rules to formulate chart stops.

3. Volatility Stop
Volatility is a more complicated edition of the chart stop. Chart stops uses volatility rather then price action to set-up the risk factors. Main concept behind it is that when environment is very much volatile, when prices traverse wide ranges, every trader like to work on the condition which is currently in the market. He does not want that any variation of the market should affect his/ her stops. This is applicable in both of the situation when environment volatility is low or high.
Bollinger band is one important way by which we can easily know the volatility. It utilizes the regular difference to know the variance price.
4. Margin Stop

The fourth stop is margin stop which helps the trader to invest his / her money properly and at a very low risk. This method is very much effective in FX if it is used astutely even it is the most unconventional money management strategy in all other strategies.
FX market operates 24 hours a day which is not the trend of any exchange market. So FX dealers as soon as receive the margin calls they can settle their customers position easily. As computers in FX market automatically close out all position if any customer is going into negative balance, customers never can get the negative balance into their accounts.
But is the customer wants to use this strategy then he / she has to divide his /her money in ten equal parts.
Ex. If a customer has $20,000 then he will have to open the ten accounts of $2,000 each with his FX dealer. At the time of transaction customer can rope only $2,000 and the remaining $18,000 will be in his bank account.

A trader can control one regular 200,000 – unit lot because most if the FX dealers offer 100:1 influence. So $2,000 would allow him to control $200,000. Though, even a 1 point move against the trader would trigger a margin call because $2,000 is minimum amount that a dealer requires to trade.