InstaForex

Tuesday, August 28, 2012

Inside Trade | Trading Risk


In a previous article, we tackled Risk in a general sense and how it could be lessened in the context of trading in Forex. We will now tackle the specific risks, particularly the main market and non-market risks, that traders have to watch out for while he/she is trading.

Volatility

Is the amount in which the price of the currency may change. A high volatility means that in a short span of time, there maybe a tremendous change in the price of the commodity. On the other hand, a low volatility means that commodity is fluctuating in steady phase over a period of time.

Leverage

Though leverage is a very helpful tool especially to those who has a small capital, it is one of the things that traders had to watch out for. Leverage, as we all know, allows us to trade more than what we are really capable of. Those additional powers, loaned to us by the brokers, has corresponding responsibilities. The higher the leverage is, the higher the risk.

A small capital with a high leverage is a deadly combination because the account may not be able to handle the weight of the trade and even the slightest price movement may be fatal.

Technical Risk

Since we are trading online and the constant presence of the internet is a must, there is also a danger for technical problems. A sudden loss of power or an internet connection problem may jeopardize our trade so its better to have a back-up for these.

Ourselves

It is just normal for an internal struggle to lurk especially when you are watching your money dwindle to nothingness. But we must learn how to control these emotion for the proper assessment of the situation and which decisions should we take.

Dishonest brokers

It cannot be helped that some will try to take an advantage on you; disguised wolves among the sheep. There are certain brokers that have a doubtful reputation and it's up to us to find out who are those. We must be wary and a constant vigilance is a must to prevent us from being included in their list of victims. There are numerous websites that are dedicated in giving out broker reviews.   

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