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The following is an example of trading Energy contracts with Trade Real-Time
OPENING THE POSITION
You think that the price of Crude Oil is set to fall but you want to limit your potential downside. So you decide to sell two contracts of the November Light Crude Oil with Limited Risk protection (one contract is the equivalent of $10 per point).
Our quote for November Light Crude Oil is 7093/7102. With Limited Risk transactions, you pay a premium on your opening price. So your position is opened at 7093 (the bid price) minus 4 (the Limited Risk premium) = 7089.
PLACING THE GUARANTEED STOP
Your position is opened at 7089. You decide to put your Guaranteed Stop at 7146. So the most you can lose on your position is:
MAXIMUM POSSIBLE LOSS
| Stop level | 7146 |
| Opening level | 7089 |
| Difference | 57 |
Maximum possible: 57 points x 2 contracts x $10 per point = $1140
TRIGGERING THE GUARANTEED STOP
A few days later, OPEC announces an unexpected reduction in output of crude oil, and the price of Light Crude jumps suddenly from 7100 to 7303. Your position is automatically closed at 7146. You have lost $1140, but the Limited Risk protection has saved you from a far bigger loss.
The trade referenced above would have had a corresponding loss associated with it if the trader had taken short position. Trading on margin magnifies both the profit and loss of any trade.
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