There are always potential risks when trading on currencies exchange market because of the differences in banks controlling and monitoring as well as unstandardized trading tools. This is the reason why forex trading training is very important as there are regions that forex trading is totally unregulated.
Forex Trading Risks
The banking network is set up by banks all over the world doing business with each other. The bank itself contain the risks of credit and losing assets. Therefore, the banks have built up a system to prevent themselves from risks. Regulations are applied in order to protect the bank in the forex market.
Because the marker is run on the bank quotes for buying and selling a specific currency, the market price of each currency is defined by the power of demanding and supplying. Because of such big volume of trading in the market, there is less possibility change for fake traders to do if they want to impact on the price of currencies. This is helpful to provide clear market trading and allows traders trade in interbank market.
Almost trader with small capacity of funds making transactions through a forex broker who is not regulated by any official organization. They can event do things which are harmful to their own customers. The government protection to customers benefits are different according to the nations in which the brokers doing their business.
Forex trading training shows that many traders use their time to research on the brokers’ profile to see if they are controlled in the US and UK because brokers in the US and the UK are regulated more strictly than anywhere else. It is recommended that traders should know which protection is available for their trading account or when to stop forex trading in the case that economic crisis happen or when their brokers fail to provide payments.
Pros and cons of forex trading
Pros: forex trading is the market possess the biggest trading volume over the world therefore this market can offer a strong liquidity. This is very helpful for traders to open or close a position in any popular currencies in seconds in any market conditions.
Cons: banks usually give traders high leverages it means that traders often need to manage a big trading volume with their small account balance. The 100:1 leverage is considered high but rare in the forex market. Forex trading training advises that traders must understand how to use the leverage and its risks. Be careful because the high leverage sometimes leads to the failures in payment ability of the best online forex brokers.
Pros: the forex market is available 24/24 hour in 5 working days and start in Australian, end in New York. There are some big markets such as Sydney, Hongkong, Singapore, Tokyo, Frankfurt, Paris, London and New York.
Cons: a successful trader needs to have a basic knowledge of economics, trending charts and diagrams. They also need the ability to capture the big picture of worldwide economics and the impacts of countries politics to the value of a currency.
In conclusion, as recommended in forex trading training, it is easier for traders with limited capacity of funds to trade in the forex market than any other markets. For traders with long term perspectives or stronger capacity of funds, they can make even more profits. A concentration on macro-economics to foreseen the currency values and trading instruments helps traders to make more money.