Get to know Forex Trading and the risks

Baca Juga

You may have heard the term forex and forex trading very often, especially now that many new brokers are actively promoting their services. Have you ever met someone who said that he did forex trading? Or is it that you yourself have trouble explaining what forex trading is even though it's doing it?

Although there are already many people who know what forex trading is, but the understanding of extensive forex trading and the ins and outs of it is still rarely peeled. In fact, by knowing forex trading deeper, we can find out the benefits and risks in it.

Know Forex Trading Literally and Practice

According to the sentence, forex comes from the word Foreign Exchange, aka foreign exchange currency. While trading is an English word which means trading. Literally, forex trading means foreign exchange trading.

Hearing the above explanation, often follow-up questions arise: So, forex trading is like exchanging money in a Money Changer? Well, this is where the misunderstanding arises. People who have known forex trading will know, that there is a fundamental difference between forex trading activities by simply exchanging money in Money Changer. These differences include:

Forex Market Always Open

Unlike the Money Changer which has limited working hours and only serves certain currencies to be exchanged with local currencies, forex trading means being part of the currency exchange globally. Broadly speaking, there are 4 very influential forex market sessions in the world, namely the Sydney (Australia) Session, the Tokyo (Asia) Session, the London (European) Session, and the New York (American) Session. If you miss opening a position in 1 session, then there is still a chance to benefit in other sessions.

Forex is always traded in pairs

Through forex trading, we will find currency pairs such as EUR (Euro) / USD (US Dollar), USD (US Dollar) / JPY (Japanese Yen), and so on. Currency pairs that are often used in forex trading are often referred to as major pairs. They are chosen because their price movements are easy to analyze, and have a favorable range in certain trading sessions.

There are no physical transactions

When making transactions in Money Changer, we will get the money converted according to the prevailing exchange rate. For example, we bring cash in the amount of 1,500,000 Rupiah to be exchanged into US Dollars. When the buying rate is at 15,000, we can bring home 100 dollars.

In forex trading, we don't need to bother coming to Money Changer and bring cash. All transactions are only done in the form of a contract, through the platform provided by the forex broker. Whether at home, office, canteen, park, or wherever you are, as long as there is internet access, forex trading activities can be done.

There is Margin and Leverage

If you exchange money in a Money Changer, you must have a certain amount of money that matches the other currencies you need. Whereas in forex trading, we are given a facility called Margin and Leverage. Trading with Margin allows you to get a chance of profit that is greater than real capital. For more information, you can go to the Margin article in Forex Trading.

Forex Trading is an investment instrument

After knowing forex trading based on its literal meaning, now we must understand that forex trading is an investment instrument. The word investment instrument must be emphasized, because in forex trading, we will work as investors, not gamblers.

Rationally, we will only make an investment after understanding how profit is possible and knowing the trading risks that are emphasized. Today, there are many frauds under the guise of forex investment. These frauds usually target beginners who are interested in knowing forex trading, because they are tempted by the unlimited profits promised in the forex world.

Basically, investment activities always have a risk that is commensurate with the possibility of profit. So, if there is a promise of forex trading 100% profit or loss free, do not be easily provoked because it is only the mainstay of fraudsters who want to 'run away' your money.

Get to know Forex Trading Risks

If you want to know forex trading as an investment, then you should not just look at the profit side. Risks also need to be measured so that you can anticipate them as best as possible. So, what are the risks of forex trading that you must watch out for when you are new as a forex trader?

Risk of Volatility

Volatility is the amount of distance between fluctuations or fluctuations in currency prices. The higher the volatility, the higher the risk of failure you get. Although it can bring huge profits if it can be used wisely, but analyzing prices when high volatility is not an easy thing that all traders can do. If you are still a newcomer, then the difficulty of dealing with volatility does not only come from analysis and speed to respond to rapid price movements, but also psychological aspects that are easily provoked by price fluctuations.

Leverage risk

Leverage is a friend and an opponent for forex traders. With leverage, the capital needed to start forex trading becomes smaller. However, there are also many traders who misuse this facility to enlarge the position in origin. If this is the case, then the risk of loss becomes greater, because they are not aware that the bigger position also brings their account closer to the possibility of a Margin Call.

Broker Risk Scam

In doing forex trading, we will get acquainted with the party called a forex broker. You must be careful when choosing a broker, because it will be an intermediary that connects you to the forex market. If one chooses a broker, then there are many adverse risks that will later burden your trading.

A few years ago, forex brokers were still limited and difficult to find. But now, very many forex brokers have sprung up. Beginner traders must be more careful in choosing a trusted broker.

The emergence of bad thoughts is one of the risks of forex trading from the psychological side. Everyone has different emotional resilience, and it takes steel minded people to explore forex trading.

Actually, this psychological pressure can be avoided. Because in reality, there is no relationship between the debt payable between the broker and the trader that is billed, there is only leverage. The thing that makes forex trading difficult is if the traders are too excited to borrow someone else's capital.

After knowing forex trading and what are the risks, you are now better prepared to become a trader. What needs to be remembered is that profits and losses are commonplace. You can gain forex profits by continuing to learn and practice trading discipline. If you are still in doubt, there are many non-deposit forex contests that can be used as a place to hone your skills.