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The Risks

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  • The Risks

    So far we've looked at the basics of the forex market and how to get started and have examined the role leverage plays in FX. Now we will examine some of the benefits and risks associated with forex trading.

    The Good and the Bad
    A number of factors such as the size, volatility and global structure of the foreign exchange market have all contributed to its rapid success. Given the high liquidity of the forex market, investors are able to place extremely large trades without directly affecting any given exchange rate. These large positions are made possible for forex traders because of the low margin requirements used by the majority of brokers. As we previously discussed, it is possible for a trader to have a position of US$100,000 by putting down as little as US$1,000 up front and borrowing the remainder from his or her forex broker. This amount of leverage acts as a double-edged sword because investors can realize large gains when exchange rates make a small favorable change, but they can also incur huge losses when the rates move against them. Despite the foreign exchange risks, the amount of leverage available in the forex market is what makes it attractive for many speculators.

    The currency market is also the only market that is open 24 hours a day with a high degree of liquidity throughout the day. For traders who may have a day job or just a busy schedule, it's a great market to start trading in. As you can see from the chart below, the major trading centers are spread throughout many different time zones, eliminating the need to wait for an opening or closing bell. As the U.S. trading closes, other markets in the east are opening, making it possible to trade at any time during the day.


    Time Zone Time (ET)
    Tokyo Open 7:00 pm
    Tokyo Close 4:00 am
    London Open 3:00 am
    London Close 12:00 pm
    New York Open 8:00 am
    New York Close 5:00 pm


    While the forex market may offer more excitement to investors, the risks are also higher in comparison to trading stocks. The ultra-high leverage of the forex market means that huge gains can quickly turn to equally huge losses and can wipe out the majority of your account in a matter of minutes. This is important for all new traders to understand, because in the forex market - due to the large amount of money involved and the number of players - traders react quickly to information released into the market, leading to very quick moves in the price of the currency pair.

    Although currencies don't tend to move as sharply as stocks on a percentage basis (unlike a company's stock that can lose a large portion of its value in a matter of minutes after a bad announcement), it is the leverage in the spot market that creates the volatility. For example, if you are using 100:1 leverage on $1,000 invested, you basically control $100,000 in capital. If you put $100,000 into a currency and that currency's price moves 1% against you, the value of the capital will have decreased to $99,000 - a loss of $1,000, or all of your original investment (that's a 100% loss!). In the stock market, most traders do not use leverage, therefore, a 1% loss in the stock's value on a $1,000 investment would only mean a loss of $10. That being said, it is important to take into account the risks involved in the forex market before diving in head first.


  • #2
    It’s so nice to read stuff like this because we can always learn something new and if we take all this in consideration, it’s guaranteed that we will only benefit from it instead of losing anything. I always enjoy learning and trying new things. I find it easier with broker like OctaFX since they are all very special with having low spreads from 0.1 pips to high leverage up to 1.500 while they also have cTrader platform which I can work very smoothly, it’s picture perfect.

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    • #3
      Forex trading is always a risky thing, but it becomes much easier when you trade not on your own money. And by the way, I've found the way how to activate $1000 no deposit bonus without dealing with Telegram.

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      • #4
        When we talk about business then we need to learn to handle the risk, it’s not possible to do business without the risk factor. However, I do feel lucky that I have got broker like OctaFX in my side, as they are serious help when it comes to handling risk and that’s because of the features present here. I love it with their 50% bonus on deposit, its sensational been use able and that really makes trading ever easier and allows me to work nicely.

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        • #5
          Forex trading business is the most challenging profession! That’s way, if you don’t know the way of secure trading and stay with high risk ratio then definitely you should suffer in your live trading! Interestingly, I have reduced my risk percentage automatically by using 100% deposit bonus of trade24 broker, I got this bonus instantly after investing my 1st trading capital! So, I don’t need to play with over-trading lot size!

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          • #6
            Forex is a very risky business. Risk Involved in Forex Trading. You can lose more than your underlying deposit. Some may even propose that trading in the forex advertise really conveys better than expected hazard. The one lead you should hold most importantly else is to trade just utilizing your risk capital. That is why forex risk management is very important. Every new traders should learn it before they enter into real trading. Proper money management, emotion control and being disciplined are the elements every traders should learn. I also carefully do my risk management. I always keep a journal. Do review my journal and try to learn from my mistakes. I am a binary options trader. If you also like options trading, go to lxmarkets.com and open an account.

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            • #7
              Despite of good trading knowledge that’s not possible at all to lead a comfortable trading life with certainly , if you don’t know how to manage risk , in my trading career, I always try to trade with great risk management policy, for avoiding risk I always use 1:100 leverage , but when I can predict the real faction of this market with certainly then I use 1:500 leverage that always ensure my trading platform LQDFX. In my demo trading I always use high leverage to see the performance how it works.

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              • #8
                We always take risks when we trade with unreliable brokers. For example, did you see Exness? When that broker suddenly changed the margin requirements, almost all the clients lost their money.

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                • #9
                  Forex is a risky business. You can't be without risk here. This is the reason there is something many refer to as risk administration. By dealing with your risk you can make great benefit. To be master in risk management you have to think about a considerable measure. I made my risk management framework with the assistance of my personal account manager relegated by FXPM.

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                  • #10
                    Some inevitable part of trading that we have to obviously ensure if we want to lead a successful trading life , trading discipline , controlling emotions , using SL , news trading with Fundamental knowledge and much more. Only good trading knowledge can’t bring success . but generally by and large traders consider good trading knowledge is the key to success in Fx.

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                    • #11
                      There are many risks factors in forex trading. You can lose all your trade out the flicker of an eye. High leverage will achieve impressive losses. There are more factors like financing costs, political occasions, monetary hazard and some more. To know all the hazard factors you need to think about an extraordinary arrangement. For you consider, MaximusFx educational resources can be a better than average hotspot for you. I discover them to a great degree steady.
                      TRADE IN INNOVATIVE MANNER with MaximusFX
                      http://en.maximusfx.com

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                      • #12
                        To avoid the risk in forex business trader should always learn. There is no end of learning. TradesFX helps me to learn more and more about forex through their educational platform. Trader can also prepare themselves using their demo platform. After joining their main account I am getting vast trading facilities. They have over 2100 trading instruments facility in their trading platform with the most recent market news, charts and quotes.

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