Deposit drain and how to prevent it
For unknown reasons, the problem of deposit draining begins to worry traders only after a losing trade is closed by the broker and the account is practically empty.
If this has already happened, it is impossible to correct the situation, so it is better to avoid such situations.
A deposit wipe is the loss of almost the entire balance in a trader's account, leaving at best 10-20 percent of the initial deposit. There
can be several causes for this, as well as ways to prevent it from happening. Below, we'll discuss the main measures for preserving your funds.
Reasons for losing a deposit on Forex.
1. Simple negligence – after opening a trade, you simply leave it unattended for a while, and upon returning to the trading terminal, you discover that the trade has been closed by the broker via a stop-out. The size of the stop-out is usually specified in the trading conditions and ranges from 10 to 30 percent, which is all that will remain in your account at best.
There are two insurance options: always setting a stop-loss, even if you control the open order, or opening trades with maximum collateral.
While the stop-loss is self-explanatory, in the latter case, you simply need to avoid using high leverage and trade within reasonable volumes relative to your deposit. Your trade's collateral level when opening should not be lower than 700%, and in simple terms, a one-point move should be no more than 0.1% of your deposit. In this case, even if the order moves 100 points against your initial order, you won't lose more than 10% of your funds.
2. Greed – trading at the maximum, using leverage of 1:100 or higher, is quite difficult to manage, and the slightest mistake can immediately result in large losses. You might simply not close the trade in time, and a sharp move could wipe out your deposit.
There's only one solution: use leverage of no more than 1:50 when trading. This will make your position more secure and manageable.
3. The psychological aspect : you simply can't bring yourself to close a losing order; you feel like the price is about to move in the right direction again. And once your losses reach 50%, you'll be even more reluctant to close the trade, hoping to recoup your losses.
Psychological pressure is precisely why most traders lose their deposits on Forex.
Only a clear strategy for managing profits and losses will help you overcome market pressure, for example, closing losing trades whenever the total loss exceeds 5% of your balance.
4. Broker fraud – while rare, it does occur. In this case, stop orders or pending orders to open a counter trade (position locking) are usually not triggered.
The only way to prevent this situation is to choose the right broker. It's best to avoid trading with companies that act as the other party to the transaction, such as so-called Forex kitchens. Their losses are the trader's profit, and they are understandably not interested in allowing the trader to make a profit.
As soon as you notice a fraudulent transaction, immediately change your broker and withdraw your money.
I hope these tips will help you avoid losing your deposit when trading Forex. I only lost my first deposit, which served as a good lesson for the future.
