Forex Trading Risks

Because the risks involved in forex trading are significant, we have outlined them separately below. Please make sure you understand the risks fully if you are thinking about opening an online trading account. Seek independent advice where necessary and make sure your broker explains risks clearly.

Forex: The Risks

There are significant risks by trading on the forex market, as there with any form of investment trade. It is therefore highly recommended that you consider a number of factors before you start to invest your money on the forex market.

Consider your experience level – will you need lots of help and support? How much research is required? - and think about your investment goals too.

Volatility

The key reason to the high risk factor in forex is the high level of volatility of the market – currencies are constantly changing in value. You can view this 'live' by looking at our exchange rate chart. You will notice that every few minutes, currency pairs are updated and might change in value.

Before you open a trading account, make sure you know all of the risks involved and that you understand that some or all of your invested capital could be lost as a result of your trading activity.

Experienced or New – Loss is Ever-Present

It doesn't matter if you have been trading forex for years or whether you are brand new to the market: there is always a risk that you will make a loss. In fact, all traders will experience a loss at one time or another. This is something which you must contend with and be prepared for.

Of course, the more you know what you are doing and understand how the product works, the better your chances or acting wisely, carefully and with due forethought. Successful traders are rarely those who act on emotional decisions or last-minute instinct. The more you use technical and fundamental analysis, the more chance you have of making the right decision.

Which Platform?

Once you have taken measures to extend your knowledge and risk awareness, you might find that you are ready to open a trading account. But which broker or platform is the best? This comes down to personal taste, software suitability as well as basics:

• Are they fully regulated?
• Have they explained the risks?
• Check the company background
• How much support do you need?
• What software is offered?
• Are there any service fees?
• How/when can you contact your broker?

Research & Analysis

The more educated and trained you are on the topic of forex, the more you can make trade decisions based on knowledge – you can be more confident that you know what you are doing. If you don't understand how currencies move/work and how to identify trends and patterns as well as decipher charts and reports, your chances of success are likely to stay low.

You can get free advice and research from online trader training academy or by using an advisory broker. Some brokers offer research and education tools as standard.

Account Testing

Much like window shopping or 'try before you buy', you can open a demo account with most good broking companies. This is an account which holds virtual funds (i.e. 'fake' money) so you can test out a platform/software and see if it suits you.

You can do this with numerous companies until you find one which suits your personal trading style. It is also a highly recommended way to practise on the market without putting your real money at risk.