Tuesday, 19 June 2018

5 Crucial Forex Risks Every Trader Should Keep In Mind While Trading

Over $5 billion is exchanged every day in the Forex exchange market. Forex trading allows traders to exchange currency pairs by buying low and selling high. With the world economy as diverse as it is, the Forex market is highly unlikely to die down anytime soon! 

Due to the intensive nature of Forex, the assets are classified as the liquid. It is crucial to note that the risks involved are numerous and the slightest slip will result in huge losses.

Here are 5 risks to keep in mind:

1)Leverage Risks: Forex requires its traders to invest an initial amount before going mainstream. This initial investment is called a margin. However due to the nature of this genre, the margin amount might fluctuate, putting the investor in a spot where he has to spend an additional buck to gain leverage.  This act when gone unchecked will lead to substantial losses. 

2)Transaction Risks: The chaotic nature of this market paves way for yet another risk in the form of transactions. Forex works on a 24-hour basis, meaning that during that time period the currency exchange rates might rise/fall randomly. During this time duration, the longer you take to settle a deal since entering it, the longer the risk. 

Forex Trading

3)Interest Rate Risks: A simple fact is that interest rates are proportional to exchange rates. Countries with high interest rates tend to have a stronger currency solely due to the fact that their assets are more sought after, due to the higher return rate (a result of high interests). When these rates fall, investors will no longer have an interest towards them and pull back; resulting in a weak currency. This entire chain affects the Forex market first hand.

4)Country Risk: The state of a country directly influences the nature of its currency. A country with a weak economic background and a crumbling political stronghold will inevitably lead to its currency weakening. Similarly, a country with a steady economic rise, stable political reign and a healthy overall social stability will have a high currency value – like USD, EUR etc. The nature of a country’s background dominates the factors governing the Forex and stock market.

5)Counter Party:Every investment needs an asset, and this asset is provided by the counterparty. The way Forex market works will ensure that there is never a form of surety in the exchanges made. From purchasing currency to selling a pair, there will always be a counterparty risk involved irrespective of how reliable the source is, that’s just the nature of this trade!

The Forex market is one of the markets with the highest monetary exchanges every day. With billions flowing around, you can never be too careful. At WesternFX we specialize in everything Forex. From the first step you take, our assistance will be by your side to make sure the losses are minimal and profits are consequent! Call us today if you’re looking for expert Forex brokers in Thailand