Two major political events are due on Sunday, March 4th and they could trigger a Sunday gapo as well as high volatility in the wake of a new week. Caution is warranted in trading these events.
First, Germany's center-left SPD party will reveal the results of the postal ballot. The 464,000 members are expected to approve their party's particiaption in another Grand Coalition (GroKo) with Angela Merkel's CDU. A rejection is not priced in and could weigh heavily on the euro as Asian markets open.
During the day, Italian's will go to the polls to elect a new Parliament in a new and complex system. The first results are due only after the open, at around 23:00 GMT and the full picture will become clearer only later on. We may see high volatility during this Asian session.
See the full preview for these events.
We advise our users to carefully consider and evaluate the potential impact of the above changes as well as the event itself on your existing and future positions, by considering the potential trading conditions, such as extreme volatility, widening of spreads, increased amounts of slippage, in the lead up to the event.
Read our best articles on how does margin trading work and how you can operate it to take profit from it or protect yourself from high-risk events:
- Margin and Leverage, by Gonçalo Moreira, CMT
A very extended and poor definition of leverage is that it's a tool that will help traders earn money fast and easy. And indeed, one of the most important advantages of the Forex market is given by the effect of leverage. Without leverage, it would be very difficult to accumulate capital, especially for small investors. But leverage can also be very harmful if not properly understood...
- Margin Call: a guaranteed limited risk, by FXStreet Team
In the futures market, a losing position may go beyond the deposited margin, and the trader will be liable for any resulting deficit in the account. In Forex this will not happen as the risk is minimized through the mechanism of a "margin call". Most online trading platforms have the capability of automatically generating a margin call when your margin deposits have fallen below the required minimum level...
- How to calculate your Margin, by Dirk du Toit
Let's say you have an account balance of 10,000 US Dollar and a maximum allowed 200:1 leverage. At the start, with no open positions, the usable margin is at 100%. You decide to open a trade using 2% of the available margin. Now, no matter how many pips you think you can pull from a trade, suppose you've decided to use a 2% entry- this is how much margin...
- How to trade: Why butterflies cause cascading margin calls, by Richard Olsen
Cascading margin calls come about because of a butterfly; be it a random news event or large market order, triggers a price spike, which leads to a margin call with one trader somewhere in the world who then has to liquidate a largish position enough to fuel a continuation of the price move triggering further margin calls...
- 6 Key Terms You Need to Know Before You Start Forex Trading, by MXT Global Research Team
Leverage is the ratio at which defines the loan amount, “margin”, that traders are allowed to use to gain access to larger sums of trading capital. Leverage can heighten both profits and losses and should be used wisely. Due to the nature of leverage, Forex providers like MXT Global have strict leverage restrictions in place to assist traders in minimizing risk. Let’s look at a numerical example...
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