The Forex market allows you to trade some of the most popularly traded currencies worldwide. Traders must understand the various risk factors contributing to the Forex industry.
Contemporary forex trading
Forex trading is the most popular way to trade currencies. Forex brokers offer various ways of trading – trading at a fixed spread with deals executed by “market makers”, automated online deals (similar to E-Trading Forex brokers), Forex arbitrage strategies and more. Forex transactions take place 24/7, so there are always opportunities for Forex traders, as economic conditions remain constant across time zones and borders. Forex trading is also not restricted by Forex brokers. Forex traders are free to invest in any direction they want.
Forex market general risk
The Forex market has become very popular worldwide for Forex traders to trade currencies at their own risk. All Forex transactions are legal because Forex trading does not involve any kind of cheating or manipulation. Forex Brokers offers an interactive platform that allows you to buy and sell the world’s most active Forex pairs with no pre-established Forex trading account with them. You can open a new real money account with your chosen Forex Broker within just 5 minutes after creating your demo account. After opening up a ‘real’ account, they will give you access.
Forex broker’s risk
Every Forex Broker (FXB) offers different conditions for new clients who want to open an account with them. Usually, they offer attractive exchange rates, but there are some factors you need to consider when choosing a real money Forex Broker. Forex Brokers use Forex trading software to enable Forex traders to make Forex trades. Forex brokers offer a facility known as ‘margin trading’ on some currency pairs, which means traders can borrow money from the broker to increase trade volumes and earn more profit. Most professional Forex traders prefer this option because it allows them to make more significant profits without using their funds; however if an adverse movement occurs (beyond your control), they will automatically liquidate your account. It’s important to remember that you’ll still be responsible for paying back any balance left behind after liquidation.
The risks in forex trading
There’s always some risk involved with any investment, but for foreign exchange markets they magnify the risks due to ‘pairs’ constantly fluctuating against one another. The following guide considers the most critical risks associated with forex trading in Dubai.
Possible fluctuations in rates
As mentioned above, Forex prices are constantly changing. This is because the market is open 24 hours a day. Rates may change when you place your order or when it arrives at its destination. The market’s volatility can be beneficial because strong currencies will become strong and weak currencies will become weak, making foreign exchange deals more rewarding for traders who predict these changes correctly.
Risks associated with negative headlines
Turn on any news channel, and there’s always bad news (or what appears to be bad news). Negative news can cause havoc in financial markets if it’s strong enough; however, most professional traders know that you should take not all information seriously. Adverse reports can create uncertainty, which leads to panic selling or buying, which could cause a wild swing in rates.
Risks associated with deposit protection
In February 2012, the EU introduced new laws regarding deposits. This means that any money put into a Forex trading account by clients is fully protected and insured against the insolvency of their broker. Although this sounds like a positive move, it can create problems for brokers because they have to guarantee all trades placed on a client’s account up to EUR 20,000 or face being forced out of business entirely.
Lack of regulation risk
Although every country has its own rules and regulations governing how brokers operate, trading in an unregulated market creates difficulties for customers who cannot complain to any official body if things go wrong. It also removes the protection previously discussed above.
Besides the lack of official authority, there is no protection on a client’s deposit if their broker goes out of business.