Forex risks and methods of dealing with them
When starting Forex trading, every trader should be aware that this type of trading is characterized by increased risk and instead of the long-awaited profit, there is always the possibility of losing your own money.
Risks in Forex can consist not only in unpredictable changes in exchange rates, but also be associated with purely technical reasons that do not depend on the skill of the trader.
Therefore, this issue should be treated with increased attention, since it is always easier to prevent a possible danger than to try to compensate for losses afterward.
The main risks in Forex are currency, organizational and technical.
Let's move on to a more detailed review of them and ways to reduce these dangers.
Types of risk in Forex
1. Foreign exchange – or as it is also called “The risk of changes in exchange rates on Forex”.
The reasons for its occurrence may be an incorrect choice of trade direction or a trend reversal. In this case, it is practically impossible to insure against losses; it is more realistic to reduce the probable amount of losses to a minimum; for this, when opening each new transaction, it is recommended to immediately set the value of the stop loss order.
Reducing the amount of leverage also helps to significantly reduce currency risks on Forex; in this case, unpredictable exchange rate movements will not cause serious harm to your deposit.
2. Organizational - novice traders often make mistakes in choosing a broker, paying more attention not to its reliability, but to the various bonuses and promotions that it advertises. As a result, this error results in the loss of your own funds.
Dishonest brokers use a lot of ways to take money from their clients, ranging from simply blocking a deposit and refusing to transfer money, ending with a sharp increase in the spread or rigging quotes.
You can avoid such risks if you immediately approach the choice of a broker responsibly, the main indicators of reliability of which are - lifespan, international awards and the absence of complaints from traders.
3. Technical – for some reason, most traders put it in last place, although these risks in Forex arise no less often than the two previous options. For example, during the writing of this article, my Internet connection was interrupted twice, which, if trading with scalping, could already cost the deposit.
Technical risks include disruption of communication with the broker, malfunctions of the terminal and failure of the equipment on which the terminal is installed.
Preventing losses for this reason is quite simple; to do this, you should always have your broker’s phone number at hand, use stop orders, have an alternative Internet connection, or better yet, have a trader’s terminal installed on your mobile phone.
Well, don’t forget about stop orders when opening a new position.
If you follow the recommendations given in this article, you can significantly reduce Forex risks that arise through no fault of your own. You just need to spend a few hours implementing these tips.