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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