Posted by: joetradingplace | February 1, 2015

Risk Management

Spreading your accounts among several brokers should be part of your risk management as a professional trader. I have heard some traders who had accounts with Alpari and they had all their money with that broker. Now that Alpari is insolvent, these traders are stuck with no funds to trade waiting for their funds to be released. This process might take a long time and imagine all the trading opportunities they are missing now. I had two accounts with Alpari, but i have other accounts with other brokers and I am still trading whilst waiting for my funds from Alpari. So guys and gals, remember to spread your funds among several brokers, and there is no need to deposit a huge amount in a trading account, just deposit funds that will only cover your margins.

We know that brokers have segregated accounts, but the FCA only pays up to 50K, so imagine if you had £200K in Alpari, you might lose 75% of your funds, I hope it won’t be the case. Traders should have learnt a lesson from this now, we always talk about not putting all your eggs in one basket, but it seems some traders don’t practice that.
So spreading your accounts among several brokers should be part of a traders risk management. This saves you if your broker goes insolvent, you found still trade other accounts. Traders should also not use all their saving for trading, i only trade using 25% of my capital, so this is spread among several brokers and the other 50% is in savings accounts.Worst case scenario is for me to lose the 25% in all my trading accounts if all my brokers goes insolvent (and the chances are very very low)…Lets say that happens, I still have the other 75% of my funds in savings to open other accounts and trade again. Also remember to deposit only funds to cover your margin..any excess funds you deposit will be dead mny.

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Responses

  1. Hello, Joe. Let’s say that I keep 50 000 pounds in the brokerage account to cover my margin on bigger trading positions. Let’s say that I need to open some extra big positions. But there is no more money in the brokerage account because of the margin. Is there any chance to keep an separate cash account in the bank and to make a brokerage company interact with the bank? Then my broker will know that I have extra money in the bank account. Knowing that the broker can use a part of bank’s account as the margin. Does it work in a real world? Your comment is very welcome on this question. Thanks:)

    • Hi Mindaugas, I don’t think that is possible, but you can deposit as soon as you see that your margin is not enough. Nowadays, deposit into trading account has been made easy, there is bank transfer and even paypal….and the funds will be available same day. But what i recommend is not to deposit all your savings in one broker. I am still waiting for my funds from Alpari, but luckily i have several accounts and i am still trading. Hope that helps

      • Thanks for your answer, Joe:)). I wish you truly to get back your funds from Alpari. Nobody expected such thing to happen.

      • thanks, still waiting for the funds, but at least i am still trading with my other accounts…..


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