What risks do I have when trading foreign exchange?
Trading on the Forex market is connected with risk. This warning is informative in nature and does not indicate that all the mentioned risks can occur directly on you.
Risks of uncontrolled leverage
The effect of leverage allows you to trade larger amounts of money than the deposit. However, leverage can either work on your side or against you. At the same time, the psychological factor plays an important role. Some traders choose a big size of leverage to operate bigger sums. It creates the illusion of "unlimited profit opportunities without any risk", but actually, it is not always like that. A big volume of traded funds may bring great profit because of the leverage, but never forget that, along with the income, there is a big possibility to lose almost all deposit. Carefully analyze and choose the size of the leverage according to your strategy that will help you avoid a high level of risk.
Risk of Volatility
A big number of trading instruments that are traded on the Forex market, have a high intraday volatility, which can either bring profit or cause losses.
There are some risks that may occur on the client's side, such as failure of hardware and software, lost connection, problems with communication systems, misconfiguration of the trading platform, etc.
At market conditions, different from normal, the time of the client's order processing may increase.
Risks are connected with the lack of knowledge of the currency market and trading on the trading platform basics.
Friday closing prices might be different from the opening prices after the weekend, in case you are not fully comfortable with the possibility of the gap, you can always close the orders before the weekend.
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Trading requires соncentration, therefore, there is a risk of money losses because of unstable moral and physical conditions.