Deposit drain and how to prevent it
For unknown reasons, the problem of losing a deposit begins to worry traders only after a losing trade is closed at the initiative of the broker and there are practically no funds left in the account.
If this has already happened, it is impossible to correct the situation, so it is better to avoid such moments.
A deposit drain is a loss of almost the entire amount in a trader’s account, when at best 10-20 percent of the initial amount remains on the balance sheet.
There may be several reasons for this phenomenon, as well as ways to prevent this from happening; further in the text we will consider the main measures to save your funds.
Reasons for losing a deposit on Forex.
1. Banal negligence - having opened a deal, you simply leave it unattended for a while, and when you return to the trading terminal, you find that the deal was closed by the broker using a stop out.
Its size is usually indicated in the trading conditions and ranges from 10 to 30 percent, and this is all that, at best, will remain in your account. There are two insurance options - always set a stop loss, even if you control the open order, or open trades with maximum collateral.
If everything is clear with stop loss, then in the latter case you just need not to use large leverage and trade reasonable volumes in relation to the deposit amount.
The level of collateral for your transaction when opening should not be lower than 700%, and simply put, a movement of one point should be no more than 0.1% of the deposit. In this case, even if you move against your 100 pip order, you will not lose more than 10% of your money. 2. Greed – trading to the maximum, when using a leverage of 1:100 and above, it is quite difficult to manage the transaction, and the slightest mistake immediately results in large losses. In this case, you may simply not have time to close the deal and a sudden movement will destroy your deposit.
There is only one recipe - when trading, use leverage of no more than 1:50, thanks to this your position will become more secure and manageable.
3. Psychological aspect - you just don’t raise your hand to close a losing order, it seems to you that the price is about to go in the right direction again, and after the losses reach 50%, you won’t even close the deal, since you will hope to win back.
It is because of psychological pressure that most traders lose their deposits on Forex.
Only clear tactics in relation to profits and losses will help you overcome market pressure, for example, closing unprofitable transactions in any case if the amount of losses exceeded 5% of the balance sheet.
4. Fraud on the part of the broker - this is quite rare, but it still occurs; usually in this case, stop orders or pending orders to open a counter transaction (position locking) do not work.
The only way to prevent this situation is to choose the right broker; it is advisable not to immediately trade with companies that act as the second party to the transaction, these are the so-called Forex kitchens. Their losses are the trader's profit; it is clear that they are not interested in letting the trader make money.
As soon as you notice a fraud, immediately change the broker and withdraw money.
I hope the above tips will help you prevent losing your deposit when trading forex; I myself only lost my first deposit, which only served as a good lesson for the future.