Question
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What are the hidden risk in trading forex?
2 Answers
<p>There are many hidden risks of forex trading. Few of them are</p><ol><li><p>Exchange rates are very volatile. There are significant investment risks as currency fluctuations may move against you, causing you to lose money.</p></li><li><p>Currency markets are extremely difficult to predict. Many difference factors affect exchange rates.</p></li><li><p>Forex scams and fraud.</p></li><li><p>Forex provider risks. If your FX provider became insolvent, you may not get your money back.</p></li><li><p>Limited protection from risk management systems. Stop loss orders will only cap your losses. You may also pay a premium price to guarantee your stop loss order.</p></li></ol>
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<p>Simply put, market risk in the Forex market is linked to everything that can impact the price of the currency pairs you’re trading. Volatility is what allows you to make profitable trades. Liquidity is an important risk that traders should take into consideration, as this usually means that their cost of trading will increase. Indeed, when brokers face a low liquidity situation, they usually increase the size of their spreads. Remember that a spread is the difference between the selling price and the buying price. Liquidity risk can also be linked to more unpredictable situations. One of the biggest advantages …</p>
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