The foreign exchange market facilitates the selling and buying of currencies across the world. It is also called as forex market. Similar to stocks, the ultimate goals of the forex trading is to obtain the net profit by purchasing low and then selling high.
When compared to stock traders, forex traders have the benefits of selecting the handful of currencies. Forex market is the largest in the globe in terms of the trading volume. Even though forex trading offers so many benefits, there is countless forex risk warning associated with the forex trades, which can result in the potential losses.
List of forex risks that traders need to consider
Interest rate risks – In the forex trading, interest rates have an adverse effect on the country’s exchange rates. When the country interest rate increases, its currency will also strengthen because of the investment flux so that it offers higher returns. Contrary to this, if the interest rate falls, then its currency will also weaken because investors start to withdraw their investments.
Leverage risks – When it comes to forex trading, leverage needs the small initial investments, which is known as margin. It is used to obtain access to the substantial trades in the foreign currencies. The fluctuation in the small price can result in the margin call in which investor need to pay the extra margin. At the time of volatile market conditions, the forceful use of the leverage will also result in the considerable losses in the excess of the initial investments.
Apart from these, plenty of other risks are available and they are transaction risks, country risk, counterparty risk, and much more. If you want to know more details about the forex trading and its associated risks, then check out HQBroker Reviews where you can learn everything about forex trading.