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, indexed managed accounts are additionally controlled by ICE UK risk managers.
Benefits of the risk management system
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Mutual approval of limits with managers (for indexed 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-indexed 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.
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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 indexed-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-indexed-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
Risk Management Schedule
Schematic diagram of the functioning of risk management parameters
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) |
Limitation is set by an investor |
Maximum drawdown limit (limitless) 5 | The maximum value of the account equity after the limit level has been set / changed | 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 | Instantly | 00:05 (EET) of the Monday of next week |
Minimum balance level (indefinite) 5 | The value of the account equity (in the account currency) falls to the given value | Only after the account has been recharged or the limit size changed | Instantly | 00:05 (EET) of the Monday of next week |
Notes:
- Is mandatory for indexed 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-indexed managed accounts, the manager sets the limit.
- Is not mandatory for all managed accounts, except the indexed accounts. ICE FX sets the limit in consultation with the manager (for indexed 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.
- Is not mandatory for any of the managed account categories. The investor sets this limit.
Risk management limits can be set in the managed account settings in the personal profile.
Differences in risk management for PAMM and MAM models
An investor is offered two managed account investment models:
- Running a deposit inside an investor pool (PAMM model).
- Creating a separate investment account with subsequent proportional copying of the manager's trades (MAM model).
The functioning of the risk management system for PAMM and MAM models varies as follows:
For the PAMM investor, there are loss limits set by the manager account (general risk management limit):
- Maximum loss for the week (required).
- Maximum loss for the day (optional).
- Maximum leverage (optional).
Individual loss limits cannot be customized.
The MAM investor can adjust loss limits by the following parameters:
- Maximum loss for the week (change in the loss limit set by the manager)
- Maximum drawdown
- Minimum balance
The limits are optional. Setting limits is optional.
The maximum loss for the week is by default equal to the value set by the manager and does not require additional configuration (can be changed)
Risk management limits can be set in the managed account settings in the personal profile.
Investing in indices is carried out both by PAMM model and by MAM model. When investing in Indices 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 index of managed accounts, the index has an aggregate loss limit for the trading week.
All indexed managed accounts are additionally controlled by the ICE FX risk management department.
It is expressed as a percentage of the deposit.
All indexed managed accounts are additionally controlled by the ICE FX risk management department.
- change the size of the Index's loss limit (in percent);
- set the maximum drawdown limit (in percent);
- set the maximum drawdown limit (USD).