The Best Important Lesson: Risks Every Forex Trader Should Know, High Risk High Profit Myth - Singapore Forex Trading, Singapore Forex Academy, Singapore Forex Association

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The Best Important Lesson: Risks Every Forex Trader Should Know, High Risk High Profit Myth

There are different types of risks that you should be aware of as a forex trader. Here are some of them.

  • Leverage Risk: Leverage can prove to be both beneficial and risky. The higher your leverage, the better your profits. Despite that, you should also keep in mind that your losses can also increase the higher your leverage gets.
  • Interest Rate Risk: The moment that a country’s interest rate rises, the currency will strengthen. The boost in strength can be attributed to an influx of investments in that country’s assets since with a stronger currency, higher returns can be more likely. But if the interest rate falls, the currency will weaken, which may result to more investors withdrawing their investments.
  • Transaction Risk: This risk is an exchange rate risk that can be associated with the time differences between the different countries. It can take place sometime between the beginning and end of a contract. There is a chance that during the 24-hours, exchange rates might change even before settling a trade. The currencies might be traded at different prices at different times during the trading hours. The transition risk increases the greater the time difference between entering and settling a contract.