Risk Exist Everywhere
There is a level of risk in any business. Level of risk differs from one business to another. You should understand that there is risk involved in Forex trading. It is advisable that you acquire enough experience before you start to trade with real money.
Primary Risk Factors in Forex Trading
Basically, every trader enters a trade for just one reason. To make a profit. Imagine the market moving against you when you have just placed a trade. That situation can definitely trigger some emotions. The primary risk of market price moving against your trade most common risk in forex trading.
However, volatility and fluctuations of market price is another factor that traders should assess before placing trades. Carrying out Technical and Fundamental analysis before making trade decisions coupled with ensuring that ones account is not undercapitalized can manage this.
Leverage magnifies the trading account profit or loss. Bankruptcy on the broker’s part is also a factor on the other side investors may not be able to get their fund deposits back when a broker goes bankrupt.
Failure of the trading platform or system is also a factor. Some traders do have difficulty in executing new or modifying their existing trades due to the failure of the broker’s trading system. Moreover, the risk of fraud is common with unregulated brokers.
Selecting a regulated broker is very important to new traders. Selecting low leverage ratio for your trading account is also very important. Learning Forex trading and having a plan, strategy, patience, and principles as help to mitigate most of the risks associated with Forex Trading.
Experience can be acquired through trading with Demo accounts. As soon as you are confident of your trading skills, try opening a live Cent account. With a cent account, one’s trading profit or loss is minimal. Opening a live Standard account is only recommended after you must have achieved a steady profit growth on your Cent account.
The selected Lot size on your trading account also plays a vital role in managing your risk. I normally recommend small lot size for new traders at the learning stage. The number of pips per trade is also important. Experienced traders usually go for 100+ pips per trade before booking their profits. Scalping (holding trades for a short time and booking small profits) is recommended for beginners.