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Exchange rate risk results from the constant shift in the market supply available worldwide and in the demand balance of an extraordinary foreign exchange position. To cut losses short and to obtain profitable positions by keeping losses within manageable limits is to pay attention to position limit and loss limit. The former refers to the limitation a trader is imposed when carrying a certain currency at any single time during the trading hours. The latter represent the measure taken to avoid unsustainable losses by setting stop-loss levels.
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