Don’t fall into the trap, read on to discover how boom and crash traders blow up their real account
Forex is a very risky business. In fact, any business which involves money and humans always come with a high level of risk.
In trading boom and crash, a trader must have a good knowledge of some basic parameters in which the equity is subjected to. These parameters include, margin, free margin, margin level and leverage ratio. A good knowledge of these parameters will help a trader too avoid blowing up an any trading account. Sadly, so many traders do not pay attention to this aspect of their trading adventure. For that reason, they suffer huge losses. Not paying attention to these parameters is like neglecting the very facts that can inform your trading decisions.
For instance, a $20 equity in a demo synthetic account with will not permit an open position in any of the boom and crash markets using a lot size of 0.20. This is because of the leverage ratio of 1:100 which brings the margin requirement of these markets above $20. Hence, the least amount of equity required to have an open position in demo with a lot size of 0.20 is $22. However. This is not so for real life situations as a $20 equity can have an open position of 0.60 due to the leverage ratio of 1:500. This therefore, brings down the margin requirement to $6.33 as the highest required equity for an open position and also enables trading to be done. The table below explains everything
MARGIN REQUIREMENT FOR BOOM AND CRASH MARKETS
|LEVERAGE (1:100)||LEVERAGE (1:500)|
|MARKETS||LOT SIZE||DEMO (± 1.00)||REAL (± 0.20)|
Having a good knowledge of the margin requirement for any market could be liberating. It serves as the primary skeleton that can inform a trader which market, he/she should opt for when a certain amount of equity is considered. Also, it can help a trader to make a good risk to reward ratio, avoid overleveraging, avoid overtrading, avoid multiple trading positions and also inform him/her about the appropriate lot size to be used as well as the number of PIPS needed to blow up an account. For instance, using 2 mini lots, a trader needs 100 pips to blow up a $20 real-life account when trading boom 500 and less than 90 pips to blow up the same equity if he/she is trading Crash 1000.
How can we prevent blowing up a $20 account? The answer is in proper risk management: a good lot size is the answer.
Looking at Boom and Crash, Deriv.com offers a lot default size of 0.20 for any of the Boom and Crash markets. 2 mini lot could be a suicide mission for any trader who has no knowledge of a good risk management. For that reason, many traders have lost more than 90% of their equity. To solve this problem, a trader needs to know how to reduce the trading lot for his small account.
This could be achieved by manipulating the lot size. For further help, kindly refer to my video, how to trade boom and crash with small lot size on YouTube using this link https://youtu.be/bjvsd7GsCRQ The video will serve as a good guide to help you understand the power of lot size and how to manipulate it to suit the equity of your trading account. Make out time to watch it again and again.
Once the issue of good risk management is in place, consistent practice and learning is what it takes for the account to grow steadily. This way, a trader will be able to settle the issue of greed and fear; the two primary emotions that drive the forex market and also make traders take inappropriate trading decisions.
As you practice what you have learned from this publication as well the video, I see you growing steadily in your trading adventure.
If this publication and the video has been of assistance to you and you would love to know more about the Boom and Crash markets, kindly email me for mentorship, training and coaching via [email protected]. Also, kindly subscribe the YouTube channel, Juvirtrades for notification purposes as I will be uploading new videos on a weekly basis.