Risks of trading Forex in retail market
By Teddy Low
Forex nowadays had become one of the most fast growing trading markets in the world.
There are several reasons why Forex had became such a popular investment among world wide speculators. In Forex trading, you can always use technology for your own advantage. The Forex market has made an amazing transformation since the advent of the Internet. Technology has now made it possible for smaller investors to play on the same level as larger corporations and banks. Anyone with a computer and a will to succeed can start trading currencies from the privacy of their home or office. Online Forex trading has changed the way that investors do business. With access to your portfolio 24-hours a day, it is really very simple to get started. You can choose whether to hire a professional to handle your transactions, or you could choose to do them yourself. Also, Forex trading provides relative large leverage rates to individual traders. Forex traders can do business with up to 200 to 1 leverage rates. With this advantage, ROI is escalated dramatically and traders can always start up small with capital as little as $1,000.
Trading in margin may magnify your ROI greatly but it may as well increase the risks of losing. Thus, knowing your risk and maintaining it is very crucial in Forex trading.
Often we heard that getting started in Forex trading is easy and instant. All you need is a computer with Internet connection and a funded Forex account with foreign currency exchange broker. However, the hard part is who to open the Forex account with (meaning who should we appoint as our Forex dealer)?
Forex market is a non-centralized market. There is no common market place for Forex traders and there is no so-call 'standard' in foreign currency exchange price. Different Forex dealers offer very different deals to their customers. As an individual FX trader, you depends solely on the dealer to make a transaction in your trades, thus picking up the right dealer is extremely crucial in your risk.
A Good dealer in Forex market might gives free professional advice, free trading system, or free related education. All these are useful in maintaining your risk in Forex trading. It is always recommended that one should invest in their brain before investing in Forex market.
Besides depending on the Forex dealer, a stop loss come very handful if you wish to limit your risks. Always trade Forex with a stop loss order as it will assure you to exit market in a price that you can handle the losses. As an example, if you purchase 100k of EUR/USD at 1.2050 expecting the EUR/USD to rise in value, and your stop is placed at 1.2020, you are guaranteed to be filled at your price (except in very volatile market.)
One way to manage your risks well in Forex market is to trade without overleveraged. Forex dealers want you to trade with high leverage values as this means more spread income for them.
Also, trading in high leverage may increase your profit or your losing. There are high possibilities that one lose money more than he or she can afford in margin trading. margin trading might sounds attractive as 1,000 cash in a 200 to 1 margin rates account will have the power of purchasing currency worth $200,000. It magnifies the ROI of the trades with less money outlay on the table. But, as most experts say, leverage is a two way street. The market does not always go in the direction you want, leveraging can magnifies your ROI in your Forex trade but it as well can turn your losses big.
Forex can be extraordinarily beneficial to a variety of people. It gives huge leverage rates, it gives incompatible liquidity to your money, it gives convenience to trade on the Internet, and it can definitely give you a lot of money if you trade smartly. Like any other trading business, if you are new to it, best advice you can get is to learn and practice more before you test your 'wings'. Seminars, eBooks, Internet, papers, video courses - all these are handy to get yourself ready. You can also try out your skill on the demo account provided free. After all, Forex trades 24hours a day and there is always money to make in the market, so why not be patience until you are fully ready for it?
About the Author
Teddy, experienced writter and webmaster. "It's okay to be a newbie!" Learn and trade Forex from scratch at www.golearnforex.net.
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