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6 Exist Risk in Foreign Exchange Market

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“Risk Warning: Binary options trading may not be suitable for everyone, so please ensure that you fully understand the risks involved”

 

Any market that always has the risk that traders in the market have to master – to have tactics and measures to limit the risk of their property. The Foreign Exchange Market (Forex) is also a big market that contains many challenges that you may encounter.

Risk Warning: Your capital may be at risk. This document is not always accurate so it is not an advice for investors

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With an average transaction value of $ 383 billion a day, the value of the forex market surpasses any other market in the world, including the stock market.

If you are smart, you will have a lot of associations that can earn big money through the Forex market. That means there are risks that always exist that you have to accept the confrontation and take responsibility when participating in this game. Your property is always fluctuating 24 hours a day, and there is no sure location for your account.

WHAT HAPPENS TO AVOID RISKS ON FOREX MARKETS?

Of course, you can minimize the risks involved in trading in the forex market, if you have read this article thoroughly and are aware of the risks that may be encountered, where they exist, How does it work? … And since there are more careful measures in the transaction to minimize the risk that you may encounter.

Interest Rate Risks

The key factor and also the biggest risk you face when trading in the forex market is the interest rate risk.

Remember, interest rates on the foreign exchange market bear the risk of eight central banks around the globe. This interest rate is determined based on the external economic indicators of the countries: CPI, Consumer spending, employment policy, real estate market …

Interest rate rule: The higher the interest rate on the forex market, the higher your margin. However, the risk is that the fluctuations in the money market is very “liquid”. If you do not have a solid prediction and experience, you may be at risk if you bet a large investment in a weakened and depreciating currency. So be sure and be smart with your investment choices.

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Country Risk

Fluctuations and risks in the currency market are highly dependent on the economic phenomena and fluctuations that a country has to undergo. So, study the level of stability / instability of a country before you want to invest and trade a certain currency.

Any rumors that are very weak – related to the stability or volatility of a country’s economy – also prompt investors to withdraw their investments in the market. Forex. And this will inevitably cause a domino effect – as more and more investors are retreating to secure their deals.

And so, the value of the currency in the foreign exchange market will fall dramatically.

Transaction Risk

It also comes from the continuous and unpredictable fluctuations of the foreign exchange market that currency values may fluctuate at any time of the day, regardless of the terms of your contract.

This is not surprising, because when the foreign exchange market fluctuates abnormally, then you still face risks. Whether you are an individual or a business, you must accept the risk of payment when the transaction costs can increase significantly – when there is a large fluctuations occurring in the market at the time your contract is not triggered. Full operation.

However, do not worry. Although it still exists but the rate you have to take this risk is very low.

The Risk of  Ruin

Whenever your risk percentage is greater than 3: 1, the risk of bankruptcy can be a reality. It does not happen often, but when the risk ratio is too high, it means your account is out of safety and you are surrounded by great risk.

For binary options as you know, when the percentage of income decreases by 50% – you are facing a considerable risk. And this will ruin the account you have on the Forex market.

So how to reduce the risk of bankruptcy? A very familiar business model – DIVERSITY “Never put all your eggs in a basket” – do not bet all your money on a single investment. This business model may not bring you huge profits, but it helps you minimize the risk of bankruptcy.

Settlement Risk

As the rules of the foreign exchange market depend on the eight central banks around the globe, payment defaults are always present in your investment and business decisions. In the same trading day, currencies may have different rates, due to the difference in time zones on continents.

Therefore, the only way to limit this risk is to choose a good day to trade the currency of your choice, and also try to choose a specific time and stability in Day to day execution of trading orders, avoiding unnecessary time risk affecting your account.

Dictatorship Risk

This is a risk that occurs when a country government uses its influence to intervene directly in the Forex market. To limit this, you need to have certain knowledge about the economics – politics – culture of the countries you invest to avoid investing in a dictatorship that can manipulate the Forex market and cause Unforeseeable impacts on exchange rates in this market.

Also be assured that there is no need to worry about these at the moment – as the world’s major monetary markets are in the United States.

Here are six major Forex market risks that you may face and deal with when trading and investing. Be sure that you have mastered the knowledge and can anticipate these risks, so that there are possible alternatives and complete peace of mind to invest in this market.

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Wish you happy and successful transactions!

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