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.
Forex risks can include not only unpredictable changes in exchange rates, but also purely technical factors that are independent of the trader's skill.
Therefore, this issue should be approached with particular care, as it's always easier to prevent potential danger than to try to compensate for losses later.
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. Currency risk – also known as "Forex exchange rate risk." This can be caused by incorrectly choosing a trade direction or a trend reversal.
In this case, it's virtually impossible to insure against losses; it's more realistic to minimize the potential loss. To do this, it's recommended to set a stop-loss order immediately when opening each new trade.
Reducing leverage can also significantly reduce currency risk in Forex; in this case, unpredictable exchange rate movements won't seriously damage your deposit.
2. Organizational risk – beginning traders often make mistakes when choosing a broker, focusing more on the various bonuses and promotions they advertise rather than on their reliability. This mistake can ultimately lead to the loss of funds.
Dishonest brokers use a variety of methods to extort money from their clients, ranging from simply blocking deposits and refusing to transfer funds to sharply increasing spreads or rigging quotes.
Such risks can be avoided by choosing a broker responsibly from the start. The main indicators of reliability are longevity, international awards, and a lack of complaints from traders.
Technical risk – for some reason, most traders rank this last, although these risks in Forex arise no less frequently than the previous two. For example, while writing this article, my internet connection was interrupted twice, which, when scalping, could have cost me my deposit.
Technical risks include disrupted communication with the broker, terminal malfunctions, and hardware failure.
Preventing losses from this issue is quite simple: always have your broker's phone number handy, use stop orders, have an alternative internet connection, or, better yet, install a trader's terminal on your mobile phone.
And don’t forget about stop orders when opening a new position.
By following the recommendations in this article, you can significantly reduce forex risks that arise through no fault of your own. All you need to do is spend a few hours implementing these tips.
