Why Forex UK is Seen as Risky
Trading and investments of any type are risky to varying extents and the forex market is no different. However, there are many people who view this market as much riskier than others. While there are certain aspects of the market that do increase the risks there are also ways that you can limit the risk. There are 5 main points that people are concerned about relating to the forex market.
The Characteristics of Forex UK
Forex UK trading differs from other types of trading in a number of regards. One of the major differences is that currency is traded in pairs of the market. The use of these pairs may take some getting used to and many new traders have problems adjusting. The brokers on the forex market do not charge commissions on trades which is actually something that draws many people to the market. However, these unique characteristics are also what people see as a risk because they can confuse new traders.
Factors that Affect the Currency Rates
Technical analysis is used to predict the trend movements of any currency pair. However, there are a lot of factor which can change the value of a currency. These factors cover economic, political and social events. Analysing these factors takes knowledge and experience which many new traders do not possess. The risk of misinterpreting the data is always present no matter how experienced the trader is.
The Size of the Lots
The size of the lots you can trade will vary depending on how much you are willing to spend. The use of leverage allows a trader to purchase greater lots. However, the market does have a minimum lot size and this is seen as risky by many people. The minimum size of the lot is centred on the amount of base currency which needs to be invested in every trade. The amount is not a small one which means a trader will need to use leverage. Leverage makes every trade much riskier as the amount of money you stand to lose is increased.
Daily Trading Volumes
The forex market is the largest market in the world far outstripping the stock market. The daily trades completed on this market are estimated to be worth around $3 trillion. While this allows for a very liquid market it also brings about a number of problems. The high liquidity and overall size of the market can actually increases the amount of risk for the trader.
An Unregulated Market
The forex market does not have any global governing body which worries many people. There are bodies within the different countries which govern the trading but this does not have much impact on such a global market. The lack of a global body also opens the average trader to fraud and scams. There are also other problems that come from not having a governing body. If you have a problem with the trade you will not be able to take your grievance to anyone as there is no-one to take it to.
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