Alpari UK’s automated risk management system is designed to reduce the risk of the funds in your trading account being depleted to zero or turning negative*.
Here is an example of how this system works:
- Let us suppose that you have opened a buy position of 1 lot in GBPUSD at 1.6400 with 1:500 leverage. If the price moves down you will be incurring losses with every pip. Without any automated intervention or stop losses in place, your account will become negative assuming the price keeps falling.
- If you started with a GBP2,000 account balance, given the trade example above, your account balance would equal zero at the first bid below 1.60784 and would continue to fall lower incurring a negative account balance. Our risk management system is designed to avoid this scenario and prevents any further trades of the same volume being opened at a 100% margin level:
Margin level = equity / margin x 100
100% = 200 GBP / 200 GBP (further trading prevented at this level)
20% = 40 GBP / 200 GBP (trades will start to be closed systematically)
We feel that it is important to handle our client’s funds the same way as we do ours, ie manage the risk appropriately to ensure that unnecessary risks are never taken whilst making sure that all funds are safeguarded. However, you should still monitor your positions at all times because we are not responsible for managing your account.
*For more information, please refer to our terms of business.