Forex represents one of the most growing trading activities in recent years, mainly because it offers the possibility of betting on the trend of currencies even with modest amounts. At the same time, however, the earnings prospects are potentially explosive thanks to the different degrees of leverage that brokers make available to their customers.
Where there are essential profit prospects, there are also exponentially higher risks. Therefore, it becomes appropriate to understand what are the dangers of forex trading to keep them under control and transform the threats into opportunities.
Too Much Leverage
There was talk of leverage or leverage. The use of too high force immediately (several brokers also offer ratios above 1: 100) risks generating excessive enthusiasm (if things are going well) or substantial losses in the trader which, in the worst-case scenario, can go as far as full loss of capital maybe in a matter of minutes.
Excess security is another of those dangers that often push traders away from a very different market from the equity or bond market after a few operations, giving two examples. Timetables, volatility, and the sensitivity of certain currencies concerning macroeconomic data and liquidity are just some of the elements that every investor in the forex world should learn to know before clicking on buying or selling.
Overconfidence also leads to another danger, that of neglecting the importance of money management. Carrying out transactions with too much security, perhaps holding too significant or even absent stop losses, can cause rapid erosion of capital, effectively preventing the possibility of making a useful trading system profitable.
Turning to more operational issues, there is a saying too often overlooked by operators. “Trend is your friend” is a trading classic which, however, does not exert the same charm as a countertrend trade that could perhaps make you gain significant profits in a short time. Better a few pips of profit but with a constant frequency rather than the remote possibility of a substantial gain in a short time, this is a rule that avoids trouble and preserves capital.
The kind of trade laws in a country is another factor to consider. Not all countries have favourable forex laws like Forex and Thai laws (Forex กับกฎหมายไทย which is the term in Thai) in Thailand.