Just as with pretty much everything profitable, forex does come with its own fair share of risks attached to it. Knowing this is the first step to becoming a better investor, and if you ignore these risks then you could quite well find that they end up being the cause of some pretty hefty losses!
Of all the risks inherent to the forex market, three types in particular stand out, and they are:
1. Self Risk
No, this doesn’t mean that you’re risking yourself, or your life, but rather that part and parcel of the riskiness of investing in forex stems from you, yourself. Foolhardiness, an unwillingness to quit when you really should, or a lack of confidence to make the calls that you feel are right can all contribute to the risks that you face.
And considering there are other risks out there, self risk is really something that you don’t need! With time and experience, you can overcome most of these risk factors though.
2. Broker Risk
Generally speaking, different brokers operate differently. Some charge a flat rate per transaction (though these aren’t often found anymore), while others take a commission based on your profits (also unpopular nowadays).
Most often, brokers tend to make money on large trades, and that means that they’re not so much interested in whether or not you actually profit, but are more interested in the fact that you start to develop a large spread.
Don’t be fooled into thinking that your broker is only concerned with your best interests!
3. Market Risk
Last, but certainly not least, there is the ever-present market risk. Going into ‘deals’ with people in forex can be risky in itself seeing as most of these people are more interested in their own profits than anything else.
Tips, advice, and so on can be helpful, but at the end of the day no one is going to give you the ‘secret’ to success for free. Be wary if you’re approached by someone who has a proposal that seems particularly risky. Chances are that they’re using you to leverage their own efforts.
While discussing these three big risks may put you off trading forex slightly, you shouldn’t let it get you too down. Yes, there are risks in the forex market, and yes, if you aren’t careful you could end up losing some money.
But at the same time, being aware of those risks is the first step towards facing them, and now that you know what you’re up against you’re certainly well equipped enough to start.
So long as you’re wary of the risks that you’re undertaking, and fairly vigilant when it comes to accepting deals and advice, you’ll find that the forex market has some incredible opportunities that are ripe for the picking.