Transaction Risks

Statistics show that most aspiring forex traders fail, and some even lose large amounts of money. Leverage is a double-edged sword, as it can lead to outsized profits but also substantial losses. Counterparty risks, platform malfunctions, and sudden bursts of volatility also pose challenges to would-be forex traders.

Foreign exchange trading attempts to make a profit by predicting the value of one currency compared to another. FX trading is normally conducted through ‘margin trading’. A small collateral deposit worth a percentage of a total trade’s value is required to trade. Trading in international currencies requires a huge amount of knowledge, research and monitoring. Before you…

Forex software programs are available for forex trading. They may claim their programs can let you know when to make trades. But no person or program can ever accurately predict movements in foreign currencies. Be wary of companies promoting a particular product that gives you access to better exchange rates or easy money. They may…

In forex trading, leverage requires a small initial investment, called a margin, to gain access to substantial trades in foreign currencies. Small price fluctuations can result in margin calls where the investor is required to pay an additional margin. During volatile market conditions, aggressive use of leverage can result in substantial losses in excess of initial investments.1

In forex trades, spot and forward contracts on currencies are not guaranteed by an exchange or clearinghouse. In spot currency trading, the counterparty risk comes from the solvency of the market maker. During volatile market conditions, the counterparty may be unable or refuse to adhere to contracts.