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Best Forex Risk Management Tools

Any kind of speculative trading, including forex and CFDs, includes an element of risk. That’s part of the game and one of the reasons forex brokers display risk warnings on their websites. This is to ensure that retail traders understand the trading risks involved and don’t overextend themselves. Forex risk management tools are key here.

Forex and CFD’ are leveraged trades. However, while leverage can help to magnify profits, it can also heighten the risk traders are exposed to.

The other side of the risk equation involves the risk to broker operators. Keep in mind that every trade on your systems exposes you to a degree of risk.

It doesn’t take much for that to rise above the levels you’re comfortable supporting. As a result, using efficient forex risk management tools becomes an absolute necessity. This is particularly true during economic releases when volatility and trade volumes can see wild fluctuations.

Forex Risk Management Tools

Trading is a dynamic activity, and relying on static or manual risk management tools can have serious repercussions. For example, we all remember the fallout from the Swiss Franc chapter in January 2015. The Swiss National Bank announced it would scrap the currency peg with the Euro, which had been in place since 2011.

The Swiss Franc surged by over 20%. Many retail investors lost money during this price surge, and many established brokers were forced out of business. The sudden exposure and wild fluctuation in the currencies simply overpowered their forex risk management tools.

Unforeseen events are never a good thing. However, given the nature of trading and any speculative activity, they are a part of the investment landscape.

To manage forex risk, you need a reliable and efficient toolset. Risk management for brokers typically uses a combination of manual and automated tools. It’s these automated tools we’ll be concentrating on in this article.

The Economic Calendar is something we’re all familiar with. One of the most popular trading strategies retail clients use is news trading. News trading is based mainly on the events on the economic calendar. While it represents an attractive option for traders, it can cause severe headaches for operators!

For many brokers, a typical risk management strategy is to limit assets their forex traders have access to around news releases. While this does help to minimize risk on forex trading, it inevitably leads to reduced trading volume. The tactic can also lead to client complaints about what are seen as limitations on their trading account.

The forex market is already highly competitive. Client complaints are one thing operators can really do without. So anything that keeps client complaints to a minimum is always welcome!

That’s precisely where our Dynamic Margin Plugin for MT4 and MT5 comes into play.

Plugit is already acknowledged as a leader in the field of forex risk management tools. However, the latest version of our Dynamic Margin plugin takes the science of risk management to a whole new level.

We’ve added our Sessions feature, which lets you set different margin levels based on pre-defined time sessions. This automation can be applied to both Account and Symbol profiles for ultimate flexibility.

This new feature lets you configure precise leverage margin tiers that kick in at specific dates and times. These tiers then come into effect based on the times and dates of the economic calendar releases.

For example, are you worried about currency trade fluctuations around the time of the NFP report? Set your session tiers to the levels you’re most comfortable with. These will then come into effect automatically on your trading platforms when the NFP figures are published.

Our new Sessions feature lets you set an unlimited number of tiers with multiple parameters, including:

  • Start Day and Time
  • End Date and Time
  • Trade Volume
  • Leverage
  • Margin

This granular technology gives you unprecedented control: no more guessing games and no more last-minute changes to your trading parameters.

If you operate one trading server or a hundred, the long-term results of your operation depend on managing your risk. With the rising cost of client acquisition, profit margins for operators are tight enough. You can’t afford to lose money because of inefficient risk management services.

With the spike in volatility around the news events, any potential loss for your brokerage is challenging to measure. However, proactive risk management measures are the best way to protect your business.

Dynamic forex risk management tools are the future of the foreign exchange markets. However, with all the goodwill in the world, relying on your trading department to manage risk manually is an outdated concept.

Trading today is fast-paced and high-frequency. Add to this the exponential rise in the popularity of Copy Trading, which can lead to compounded problems. For example, imagine a hundred or a thousand traders following a strategy provider. The potential downside to your operations is clear to see.

According to a Harvard University paper, trading volumes increase between 350% and 450% around news releases. That’s a lot of extra trade risk to manage. But, unfortunately, it’s also a lot of additional brokerage commissions to ignore if your strategy is simply to limit trading around news releases!

Fortunately, our new Sessions feature takes care of proactive risk management. The events on the economic calendar are a known factor. The assets these events can potentially impact are known factors as well.

The Dynamic Margin Plugin provides a forex risk management tool that can help minimize potential losses from economic calendar releases.

The benefits aren’t limited to your brokerage results either. With our new Sessions feature, you not only allow your traders unlimited news trading. You also go a long way to minimizing their trade risk as well.

Yes, your traders should set their own stop loss levels in line with their trading plan and trade position sizing. Nevertheless, traders are still prone to losses from sudden price spikes and high leverage.

Our new Sessions feature minimizes the downside for your traders as well. One of the most frequent comments we see about our Dynamic Margin Plugin is how it helped to increase trade volumes by allowing retail traders to trade longer.

We’ve said this before, but it’s worth pointing out again. The industry is getting more and more competitive. The cost of client acquisition has been on a rising trend for the last few years, and we don’t really foresee this changing any time soon.

With the shift to DMA models, increased trade volumes mean increased brokerage commissions. So keep your traders happy, and your trading volumes will increase.

At Plugit, we design plugins that solve real-world problems for your operations. Our flagship product, the YOONIT suite, represents the ideal solution for forex brokers, regardless of the number of clients you have.

The advanced automation we build into our products gives your operations an unfair advantage over anything else on the market today. We’ve been perfecting our product line since 2012. Our plugins have been tested in multiple real-world situations, and the results have always been outstanding.

Our Dynamic Margin Plugin is no exception. The new Sessions feature in the plugin is a real breakthrough for risk management automation and dovetails perfectly into your setup, whether that is based around MT4 or MT5.

We’d be more than happy to show you this advanced feature set, so why not get in touch with us for a no-obligation demo of what we can do for your operations? The results are sure to be an eye-opener!

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Contact us and see how PLUGIT can help you optimize your operations!

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PLUGIT uses your information to contact you about our products and services. For more details, please check our Privacy Policy.