Forex Risk You Need to Understand Before Starting Invest
Being an investor, you are required to not only learn the investment schemes and the benefits that will be earned alone. There are other factors that you need to understand and learn well before starting investing, one of which is the investment risk.
Whatever investment you make, there must be risks that follow as well as the Forex investment. Forex is included in the category of high risk-high return investment investment. This means that Forex is a type of investment that has a high risk, but has a high yield.
Currently we will explain to you all, 3 risk issues related to Forex investment.
1. Total Loss Possibility
The first risk is total loss possibility which means there is a possibility of losses that reach 90% of the total funds invested. The mentioned risks are the worst possible possibility of the investments made.
Why can it be that big?
This is due to a factor known as margin trading.
Example case like this, you as an investor buy 1 lot GBP with GBP USD pair at the price 1.9600. When the GBP strengthens against the USD, then you can benefit from the strengthening that occurs. Conversely, If the GBP weakened against the USD then the investment losses will you get from the investments made
In the forex trading market, although you open as many as 1 lot that requires a guarantee of 100 pounds or equivalent to Rp 1.5 Million, does not mean the initial capital minimumun you deposit is equal to it. Usually brokers set a minimum deposit above the price of 1 lot.
Some brokers often set a minimum account opening of USD 250 or USD 500. The point is to hold the position when the price moves opposite and weakens.
For example you start investing with USD 250.100Pound or equal to USD 196. Then the rest of the funds you have for USD 54 (USD250 - USD 196). This amount of funds is used to maintain your position when prices move down, and not strengthened.
2. Likuditas risk
The next risk you need to understand with regards to forex is a matter of liquidity. As mentioned above that GBPUSD can experience movement up to 100 points in just a single day. This means that you are likely to earn profits and losses of about Rp 1 million per day.
This means you can lose money and experience total loss as we have mentioned above. Losses can occur within a short time ie within one day only.
It can be like you have been tired of saving for 4 months to start investing in forex and you have to accept the fact that all your savings can be lost within 4 days. Theoretically all these things could happen in the forex market. Losses that could happen when you decide to enter into forex.
From the above explanation you can understand that forex is included in the high risk-high return investment. An investment that has a high risk but also has a high profit potential. Both of these things can not be separated from one another.
The more important thing you need to do is not to be easily fooled by those who only highlight the huge benefits that you will get from forex. A good Forex marketing should provide the best advice to its customers and should inform the likelihood of an investment loss being made.
3. Forex Risk in Trading Method
The last risk you have to deal with with forex is the risk associated with trading methods. If you pay attention to the example we have mentioned above, then you can conclude that the decision to sell or buy is very important and crucial.
Your decision regarding when to enter, how long you will be in, or when to buy and sell will affect the funds you invested in the future.
Therefore, in order to produce a good decision you must be able to predict the price movement. You should study every daily analysis done, the trading method you will use, and what kind of system you have. These are the things that will determine whether later you will gain profit or loss when investing forex.
What methods should be done?
If you have such questions, remember that no method will guarantee you a definite benefit in the future. A system that has been created by a forex expert may not necessarily produce a definite profit for you.
This can happen because a system is not necessarily suitable and in accordance with the profile of the person who will wear it. Everyone has different factors from one another to everything from capital problems, how to trade, hours of flying owned, how to analyze, and also the psychological differences that each person has.
The above factors cause none of the methods that guarantee that you can benefit continuously in the future. You may follow the best trader you ever know, but remember it is not a guarantee that you will benefit continuously.
What if the price moves down and USD 54 is exhausted?
You can keep that position until the price goes down by 54 points. Because basically 1 Point GBPUSD equal to 1USD.
If the remaining funds you have for USD 54 is exhausted, then your position will be closed automatically by the system due to the lack of collateral owned. Finally the loss that you will bear is USD 54 and the remaining funds amounted to USD 196.
The example cases mentioned above are called margin calls. Margin Call is a situation where the position is closed automatically by the system because there is no guarantee of funds you have. This is a risk that is not fun by traders who play in forex.
Back again with the case we have seen above, the GBPUSD pair is a fast moving pair up and down. With its volatility, GBPUSD can move up to 100 points in just a single day. So you could just lose margin call in just one day.
The risk can occur due to opening an account with an affordable price of only USD 250. Investing with minimal funds will have a very high risk and is not recommended for you to do.