Trading in the foreign exchange market carries some risks and can cause you part or complete loss of your funds. The degree of risk depends on many factors. Manually controlling these factors is an objectively difficult task.
We have developed a unique risk management system that protects investors from unplanned losses and additionally controls managers, freeing them from psychological stress.
The manager sets part of the limits (mandatory part of the system). These limits are mandatory and pre-defined for investors. The investor can establish personal risk management limits (additional part of the system). Also, portfolio managed accounts are additionally controlled by ICE UK risk managers.
Benefits of the risk management system
For the manager
-
Mutual approval of limits with managers (for portfolio managers)
All mandatory limits are agreed with the managers such that the limits do not interfere with managers' trading activity. In most investment systems, the investor sets limits without consulting the manager and this leads to losses. -
Non-portfolio managers set mandatory limits
The manager sets all mandatory limits based on his risk management rules. In most investment systems, the investor sets limits without consulting the manager and this leads to losses. -
Freeing the managers from psychological stress
A manager cannot alter the parameters of risk management limits at will directly in the course of trading. As a result, the probability of deviating from the trading system and the chance of an increase in risk are all minimized. The manager is protected from committing mistakes caused by the impact of strong emotions.
For the investor
-
Pre-defined risk management settings (mandatory part of the system)
The investor is not obliged to understand portfolio management and configure the risk management parameters of accounts by himself. In consultation with managers (for portfolio-managers) ICE FX sets the mandatory risk management limits that allow the investor to be confident that his losses will not exceed the specified value. These limits can also be set by non-portfolio-managers. -
Additional risk management
Some investors have extensive experience and knowledge in portfolio management. So when needed, the investor can adjust the limits of risk management parameters at his/her discretion. -
The risk management system does not depend on managers
The manager cannot alter the risk management parameters at any time. As a result, the investor's loss is prevented from exceeding the regulated level at the moment the investor invests in the managed account. Parameters are changed only with the consent of ICE FX and after all the investors involved have been notified and provided with the opportunity to stop working with the managed account until such changes come into effect. -
Simplified portfolio management calculations
Thanks to loss limits, the investor can make accurate calculations related to distribution of portfolio shares between managed accounts and risk level of the portfolio and its components.
Risk management limits can be set in the managed account settings in the personal profile.
The risk management system allows to set the limits of 5 different parameters – once any of these parameters is triggered, trades will be closed at the current market quotes, and trading activity will be blocked for a certain time.
The manager sets part of the limits (mandatory part of the system). These limits are mandatory and pre-defined for investors. The investor can establish personal risk management limits (an additional part of the system).
Types of limits
Established by the manager
Maximum leverage limit
You can set the maximum leverage limit.
Maximum daily loss
This limit is similar to the "maximum weekly loss" limit. It limits the maximum loss for the day. This limit is calculated based on the equity value at the beginning of the trading day, regardless of how much the account equity grows within this period (unlike the maximum drawdown limit, which is calculated based on the maximum equity after this limit has been set).). It is expressed as a percentage of the deposit.
Maximum weekly loss
It limits the maximum loss for the week. This limit is calculated based on the equity value at the beginning of the week, regardless of how much the account equity grows within this period (unlike the maximum drawdown limit, which is calculated based on the maximum equity after this limit has been set). It is expressed as a percentage of the deposit.
Maximum drawdown
The maximum drawdown limit is calculated based on the maximum value of the account equity in existence after this limit has been set. If after some time the account equity falls to the value of the established maximum drawdown, this limit will be triggered (comparable to Trailing Stop in the MT 4 terminal). It is expressed as a percentage of the deposit.
Minimum balance
It indicates the minimum amount that when reached, limit will be activated and trading on the account will stop. It is expressed in the currency of the deposit.
Set by the investor
Schematic diagram of the functioning of risk management parameters
____
equity
lim(max(DD)) (20%)
Maximum drawdown limit, %;
lim(Loss(W)) (10%)
Maximum loss limit for the week;
LWM (Low watermark) ($800)
Minimum balance limit, USD;
Risk Management Schedule
| Kind of limits | Baseline | Limit conditions | Trade continuation (not earlier than) | When parameter changes come into force | ||
|---|---|---|---|---|---|---|
| Reducing the Limit Value | Increasing the Limit Value | |||||
| Restriction is established by the manager | Maximum loss limit for the day 4 | The value of the account equity at 00:05 (EET) of the current trading day | The value of the account equity (in percent) falls by the size of the given limit | 00:05 (EET) of the next trading day | 00:05 (EET) of the Monday of next week | 00:05 (EET) Monday of the following week |
| Maximum leverage limit 1, 3 | 00:05 (EET) Monday of the following week | 00:05 (EET) Monday of the following week | ||||
| The restriction is established by the manager and can be changed by the investor | Maximum weekly loss 1, 2 | The value of the account equity at 00:05 (EET) of the Monday of the current week | The value of the account equity (in percent) falls by the size of the given limit | 00:05 (EET) of the Monday of next week | Change is initiated by the manager: 00:05 (EET) Monday the week after the current week (the soonest weekly rollover + 1 week) Change is initiated by the investor immediately. |
Change is initiated by the manager: 00:05 (EET) Monday the week after the current week (the soonest weekly rollover + 1 week) |
Notes:
- Is mandatory for portfolio managers, subject to the risk management system of ICE FX. Set/changed by ICE FX in consultation with the manager.
- Is a mandatory limit for all managed accounts. The manager indicates the current value in the offer. For non-portfolio managed accounts, the manager sets the limit.
- Is not mandatory for all managed accounts, except the portfolio accounts. ICE FX sets the limit in consultation with the manager (for portfolio managed accounts). For other managed accounts, the manager sets the limit.
- Is not mandatory for any of the managed account categories. The manager sets this limit.
Risk management limits can be set in the managed account settings in the personal profile.
When investing in Portfolios under different models, risk management functionality is similar to that when investing in a managed account (MA). Along with limits that are inherent in the portfolio of managed accounts, the Portfolio has an aggregate loss limit for the trading week. All portfolio managed accounts are additionally controlled by the ICE FX risk management department.
Risk Management of Portfolios
Risk Management
Risk management of personal portfolio managed accounts. Is mandatory for all portfolio managed accounts. All parameters of managed account risk management are agreed with managers in order to avoid interference with correct trading.
Portfolio Loss Limit (%)
Additional loss limit on the Portfolio as a whole, operating independently of the risk management rules of individual managed accounts. Limit of maximum loss for the week of the Portfolio (in percentage). The limit is set by ICE FX and is dynamic (reviewed depending on the Portfolio indicators).
Maximum leverage limit
It limits the maximum loss for the week. It is calculated based on the equity value at the beginning of the week, regardless of how much the account equity grows for this period.
It is expressed as a percentage of the deposit.
It is expressed as a percentage of the deposit.
Monitoring by ICE FX risk managers
If necessary, ICE FX risk managers may stop the trading activity of portfolio managers, or make adjustments to it.
Maximum leverage limit
Compulsory maximum leverage limit of portfolio managed accounts.
All portfolio managed accounts are additionally controlled by the ICE FX risk management department.
- change the size of the Portfolios loss limit (in percent);
- set the maximum drawdown limit (in percent);
- set the maximum drawdown limit (USD).