Risks Associated with Forex Trading

Exchange Rate Risk : -this is generally a risk caused by changes in the value of the currency. Normally, currencies are associated with the effect of continuous volatility shifts in the forex market. The risk can be enormous as it’s determined by the perception of a market of which currency might shift towards based on the possible outcomes that occur. Also, as a country’s exchange rate falls, its currency will weaken and vice versa.

Transactional Risks : -Many are the times when forex markets are associated with the time difference that is between the beginning of a contract and when it’s been settled. Normally, the forex market operates on a 24-hour basis and which makes it possible for exchange rates to change before trades are settled, and for that, the associated transactional costs might be risky.

Country Risk : -Basically, before one makes a decision on which option to invest in, it important to assess the economic structure of a country and how stable it is. Maintaining a stable economy is quite a challenge, and for that, the value of a given currency might fall at any given time and which can extremely affect the investment of an investor .

Other associated risks include;  counterparty risk, which is the risk of default from a dealer or broker in a given transaction leverage risk, which is associated with small price fluctuations and settlement risks.

 

About the Author

Payam Zolfagharian

Hi my name is Payam Zolfagharian, I’m a retail forex trader. I will show you how to be a successful forex trader, preserve your capital, generate consistent and profitable returns from forex trading and finally trade for a living.

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