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Forex broker strategy - Fixing losses
Basis of this broker strategy is the following thesis: dealing centers do not use brokerage as the basic technology and a basis of profit are the client's losses. The client transactions completed in the current day, as a rule, do not bring to the dealing center neither greater profits nor heavy losses. In a total sum, these transactions make small profit. The basic money appears when positions open in the current of several bank days and lead the client to even greater and significant losses.
Acceptance of such thesis as an axiom (statistically and empirically confirmed) assumes next model of actions. It has not done anything with client positions during the moment of opening. Dealers simply observe the change of client's profits and losses. Dealers begin to undertake any actions on overlapping client positions only when sizes of current client losses reach certain boundary values. For example, the client position can be blocked when the current loss on this position will reach, for example, 30 % of the client deposit (this figure management of the dealing center, naturally, can vary in any order, proceeding from its own reasons). On the other hand, the client position can be blocked when the current loss on it will reach such sizes, that through a small number of pips (e.g. 20-30 pips) this position will need to be closed for restriction of possible super losses.
As it is possible to see, the technology of overlapping described above aspires to technology of "kitchen" and as a matter of fact is kitchen, but with administratively entered boundary conditions.