HOW RISKY IS FOREX TRADING

HOW RISKY IS FOREX TRADING

Like any other form of trading, Forex trading also involves risk. When you are dealing with currency, you should understand that there are many factors that affect its value and hence it is very difficult to predict the market direction. Risk and Reward is associated with any sort of investment and so is the case with Forex Market.

generalarticle5_2Why is Forex Market risky? First and foremost it is very important to understand the concept of leverage in Forex Market. This is one of the factors that results in a huge profit or loss even when the price changes by a very small amount. Leverage is nothing but the ability to control a huge amount of money with a very little or no investment. For example, when a trader trades a $10,000, he might be just having to invest $1000. Thus, the trade is 10 times more than the initial investment. In this case the leverage is said to be 10:1. When you gain 10 times you can also lose the same percentage. Leverage thus being double sided is one of the many factors that make the Forex Market risky.

Let us now check out how risky this market is.

Mixed Emotions Greed and Fear

Greed makes you enter into a trade when you don’t want to and Fear stops you from taking the risk. These emotions tend to control your trading decisions which can be risky. Be calm and educate yourself well before you enter into Forex Market. This will help you control your emotions and hence reduce the risk of deviating from your trading plan.

Beware of scam in the Forex Market

Scams are very prevalent in the Forex Market. Don’t get into scam trading and scam trading signals.

Hurry of making profit (especially newbies)

It may take a while for you to be profitable in the Forex Market. You might lose several times before you win. The good thing is you are learning and becoming experienced. With expertise you learn to trade and control your risk. Be patient and wait for the right opportunity instead of rushing. We are sure you will be profitable if not now, may be in the long run.

Risk of losing the entire capital

Forex Market is highly volatile and there are lot of things happening all around. There is always a risk of losing your entire money. But yes if you risk it keep in mind that you might lose it. Be prepared to face the loss. The key rule is never risk more than what you can afford to lose in this market.

To conclude, Forex market is risky like any other trading market. There are a lot of market participants involved and there are lots of price changes happening continuously. Risk is obviously a part of it. But how you manage the risk is up to you.  With the knowledge and experience you will understand the risks involved in your trade and the management strategy you would take up.

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