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Top 10 Forex Risks To Consider Before Starting Currency Trade

There are several forex risks that one needs to be aware of while trading in currency. In as much as there is much money to be made in the forex market, one must understand the risks involved in the market and prepare one’s mind to face the reality should one be confronted with any of…

There are several forex risks that one needs to be aware of while trading in currency. In as much as there is much money to be made in the forex market, one must understand the risks involved in the market and prepare one’s mind to face the reality should one be confronted with any of the challenges in the course of doing business.

Forex trade is not always a bed of roses; the ecosystem is so volatile that the possibility of losing one’s hard earned income is quite high. The volatility of the market makes it almost impossible to predict what could happen in the next minute. In this post, we shall take a look at various risks one could be exposed to, some tips to enable you trade safely, forex trading FAQs, and a lot more.

Risks you must consider

If you wish to do your currency trade with safety and not be exposed to the danger of losing your money, you need to be familiar with the following risks associated with the business irrespective of the platforms where your trading is carried out.

Credit Risk

Credit risk occurs when a party to a trade finds it impossible to pay the other party. One reason why this could happen is if one party is bankrupted or defaults in making his payment. In order to avoid this, you must understand the rules and regulations binding on the forex broker you are dealing with.

Ideally, every country has some forms of regulation in place to check the activities of the forex brokers that operate within them. They ensure that brokers have adequate reserve in case the other party to the trade is unable to cover their trading loses.

Volatility Risk

The forex market is highly volatile and volatility has a way of influencing the movement of prices and the profits or losses one could make. Volatility is not always about the negative trends in the market; there are equally the positive sides to it.

Making significant gains would almost be impossible if there were no volatility in the ecosystem. However, the risk of losing huge amount of money increases when there are high impact news events. Traders need to be watchful because periods like these can affect the position of a trader unfavorably.

Broker Risk

While some forex brokers are highly regulated, some others are not. What this implies is that you have more security patronizing the regulated broker than the unregulated ones. The kind of brokers you deal with determines how your working capital is managed.

In order to not fall into the wrong hands, you need to do due diligence of researching your broker before entrusting them with your money. Some smaller brokers (especially those domiciled in offshore locations) shy away from being regulated because of the cost of obtaining operational licenses in their country. Moreover, regulators always require that they meet certain capital obligations to be allowed to operate.

Each country has specific rules that govern its forex market. In order to ensure the safety of your fund, it is advisable to do business with brokers that are regulated by government body. 

Exchange Rate Risk

The dynamic changes in the value of currency expose those currencies to certain levels of risk. Companies operating in multiple countries or exporting their products regularly are particularly exposed to exchange rate risk. 

The exchange rate changes in the country where a multi-national company operates in and that of the country in which it does business play a great role in determining their profits and margins.

Margin Risk

Forex trade can considerably be influenced by margin or leverage risk.  Margin trading enables you to make use of leverage. Generally, it is essential that you put up just a part of the entire value in good faith when about to place a forex trade. But when you are able to make use of a borrowed capital to improve your position size, then one can say that your trade is leveraged.

Margin requirement is the amount you are mandated to place upfront. Though some brokers permit their forex trading clients to leverage up to 100:1, it is not to say that using it may always be good for you.

Counterparty Risk

The company that offers the asset to the investor in a financial transaction is referred to as the counterparty. Counterparty is therefore, the risk of non-payment from the broker or the dealer in a particular transaction. The counterparty risk may result from the market maker’s solvency in spot currency trading. When volatile conditions arise in the market, the counterparty fail to or are unable to stick to the condition of the contract. 

Leverage Risk 

Leverage necessitates a little initial investment otherwise known as a margin, in order to have access to sizeable trades in foreign currencies. When there is a little price instability, this can lead to margin calls which would need the investor to disburse an extra margin. Using leverage insistently in market conditions that are volatile will lead to significant losses more than the investment initially made.

Transaction Risks

These is exchange rate risk which usually comes as a result of the differences in time between the commencement of a contract and its settlement. Exchange rates can sometimes change before trades have settled, since forex trade is done on a 24 hour basis. As a result, prices are not always stable; currencies at different times of the day may trade at different prices. Transaction risk gets higher when the time differential between when a contract is entered and settled is greater.

Country Risk

Most developing countries fix their exchange rate to a world leader such as the dollar or pound sterling. To ensure that fixed exchange rate is sustained, the central banks need to have enough reserves in place. Recurrent deficits in balance of payment can trigger a currency crisis and lead to currency devaluation. This may adversely affect prices and forex trading.

Since investing is speculative in nature, if an investor feels that the value of a currency is going to dwindle, they may start withdrawing their assets; this leads to more devaluation of the currency. In the forex trade, liquidity danger and credit risks are made worse by currency crises. This also makes a country’s currency less attractive.

Interest Rate Risk

A rise in a country’s interest rates attracts more direct foreign investments since investors are assured that they will get higher returns from investing in the country’s assets. This investors’ confidence further makes the currency of that country stronger in value.

On the contrary, when interest rates fall, investors withdraw their investment thereby bringing about a fall in the strength of the currency. The differential between currency values can easily bring about remarkable change in forex prices, as a result of the effect of interest rates on exchange rates. Having examined the various risks, it’s time to move ahead to examine the kinds of exposures in the forex market.

Currency exposure

This is a situation where an investment or part of an investment is in foreign currency and becomes exposed to risk when the value of that currency experiences some changes. There are basically three types of Currency exposure and they include:

Transactional exposure

This is as a result of an actual transaction occurring in business which involves foreign currency. If a foreign currency transaction and the currency market shift in a direction that is not favorable, it can easily defeat the chances of making profits, which is primarily the essence of the monetary transaction.

This kind of foreign currency exposure usually comes up when there is payment for imported goods or services, foreign debtors of sale, payment towards the EMIs of debts, receipt/payment of dividend, etc.

Translation exposure

The other name for this type of exposure is accounting exposure. This is due to the fact that the exposure results from translation of books of accounts into the home country. Translation activity is performed on account of reporting the books to legal bodies or to the shareholders.

Loses or gains resulting from translation exposure usually don’t have more meaning over and above the reporting requirements. If the currency market experiences a favorable change in the following year, the exposure can be overturned.

Economic exposure

Foreign exchange controls the value of a firm. A firm’s value is the function of operating cash flows and the assets it possesses. Economic exposure has higher impact than the two aforementioned exposures. It can determine the operating cash flows and the assets of the firm. It is usually difficult to identify and measure this type of exposure.

Tips for safe trading

Since forex trading involves currency exchange risk, every trader needs to have some tips for mitigating the risks in order to prevent losing huge sums of money while trading. Some of the tips to follow include:

Choose the right bet size: make sure to check the live currency rates before proceeding to choose the right bet size. Avoid a position which is too large compared to your account size.

Limit forex trade: to avoid possible damage, you should dedicate a few percentage points of your entire portfolio to forex trading.

Set some limits: to reduce the level of damage, it is necessary for you to set a stop-loss order in place, to enable you exit a position in case a particular price does not favor you.

How to be a better forex trader

In order to be a better forex trader, the following guidelines can really be of help to you:

  • Check your emotions

The tendency for a new trader to place trades based on emotion is usually very high, especially after making a few successful trades. This increases the risk of losing all of one’s investments. You must avoid plunging in all your money after a few successes or losing hope too easily when you experience a few failures. Not checking your emotion could expose you to high fx risk.

One way to show your smartness is to start with little amount and minimize losses even though your profits will be small. It is better to earn small profits than lose all your money.

  • Practice makes perfect

It is quite understandable that the forex market is highly volatile and no one can easily predict price movements. However, to be on the safe side, it is good for one to practice in demo environment and understand the nitty-gritty of the business before graduating to live trade. This helps to reduce losses.

  • Appraise financial standing

Make sure you have evaluated the risk involved in the market and you are ready to go ahead with the amount of money you are about to invest in the business before actually going ahead. You could lose money that is worth a fortune to you.

  • Look for a dependable broker

Money is hard to get and you wouldn’t want to throw your money away. Do you? Online forex trading is carried out through a broker; you need to carry out extensive research to be sure who your broker is before using their platform. 

One way to be sure of your potential broker is to look up their trading record, the commissions and the spreads they collect, their trading platforms, deposit and withdrawal methods, and also get in touch with traders who are with the broker to ascertain how efficient they are at filling orders.

Forex Trading FAQs

  • Can anybody trade forex?

Though the forex market is open to everybody, only those who have basic understanding of forex trading should trade. You are going to lose your money if you have no knowledge of how things are done.

  • What are the trading hours on Forex?

Forex trading is usually available 24 hours a day from Sunday 5:00PM EST to Friday 4:00PM EST.

  • Can one trade forex on weekends?

No. Forex trading usually closes on Friday afternoon and reopens on Sunday evening.

  • What is the minimum starting income for forex trade?

The minimum amount needed to start forex trade depends on the broker. While a lot of brokers accept a minimum of $100, others are willing to take something less. However, most brokers allow you to use the demo account first to understand how things work before putting your money.

(Featured image by Csaba Nagy via Pixabay)

DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.

This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.

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RoboForex adding EOS Cryptocurrency

RoboForex adding EOS Cryptocurrency

RoboForex announced today adding EOS, a cryptocurrency which is now available for trading with the broker on both MT4 and MT5 platforms.

Roboforex added EOS CryptocurrencyCurrently, RoboForex clients have 7 crypto instruments to choose from.

RoboForex keeps expanding its crypto portfolio.

The latest addition is EOSUSD, which is already available to the clients through MT4 and MT5, alongside with six other crypto pairs:

BTCUSD, ETHUSD, BCHUSD, DSHUSD, LTCUSD, and XRPUSD.

The EOSUSD trading conditions are the following:

  • minimum lot size: 100,
  • minimum increment: 0.01,
  • leverage 5:1.

EOS is a cryptocurrency that was introduced in 2017 and is based on blockchain and smart contracts. Its key features are scalability, decentralized apps, and huge throughput (a few million transaction per second).

This is another step towards developing our crypto portfolio.

Our clients do value the flexibility and state of the art technologies we offer them As for us, our mission is meeting their expectations and constantly improving the trading conditions by opening the door to new instruments and opportunities.

says Denis Golomedov, ;Marketing Director at RoboForex.

Roboforex and Cryptocurrency

This Broker has been on the forefront of crypto trading on the Metatrader 4 and Metatrader trading platforms from the beginning and pushing for more and more trad-able assets to be added to their offering .

it took this broker a little bit of time but now that they got them selves into the cryptocurrency trading arena they come to lead the pack. this in combination with their the trading platforms they are offering makes this a broker to take notice of.

as yet there are not enough brokers that offer metatrader 5 and especially one where you are able to trade bitcoin ethereum, litecoin and now also EOS.

About RoboForex

RoboForex is a brokerage company catering to clients from various countries. The broker’s focus is providing the traders with access to its own financial market platforms.

RoboForex Ltd is a licensed company (License No. IFSC/60/271/TS/17).

 

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Local bitcoin Trader Jailed for Money Laundering

Indicted: Local bitcoin Trader Jailed for Money Laundering

Local Bitcoin trader, Theresa Lynn Tetley, also widely known as Bitcoin Maven has been indicted for indulging in illegal bitcoin-for-cash transactions. According to the Central District of California, the LocalBitcoins.com trader has been sentenced to 12 months in prison.

She has also been handed a three-year supervised release and a $20,000 fine. A former real estate investor and stockbroker, the court ordered her to relinquish $292,264.00 in cash, 25 assorted gold bars, and 40 bitcoin.

money launderingTetley pled guilty to one count of operating an unlicensed money exchange business, and another related to money laundering. Her case is the first of its kind in the Central District of California.

Tetley was procedurally supposed to register her business with the Financial Crimes Enforcement Network, an agency of the United States Department of the Treasury.

The agency is responsible for analyzing transactions to curb money laundering and related financial crimes. She also failed to implement standard anti-money laundering protocol, including reporting of certain financial sources as per the requirements of this type of business.

Tetley is said to have traded over $6 million for clients within the United States and charged higher rates as compared to other traders within the LocalBitcoins platform.

Also noted in the court documents was that Theresa Lynn laundered bitcoin for a customer who had been suspected of having acquired the cryptocurrency through illegal activities, including drug sales on the dark web.

She also carried out a bitcoin to cash transaction for an undercover agent who had explicitly declared that his bitcoin was tied to narco-trafficking operations.

According to the report, Tetley’s service was responsible for fueling the growing use of cryptocurrencies to launder money and supported a black market system set up purposely to circumvent the law.

The organizations involved in her investigation included the IRS Criminal Investigation and the Drug Enforcement Administration.

Just One of Many

That said, the government has been committing significant resources to counter the crypto – dark web menace, and earlier this month, a major sting operation was carried out against a major money laundering network. Thirty-five suspects were arrested.

One individual, identified as John Edward Monette, was charged with Conspiracy to Distribute a Controlled Substance. He was also alleged to have carried out numerous bitcoin for cash exchange transactions on the dark web, most of them in 2017 and totaling about $19,000.

Another dark web vendor busted during the operation, Ryan Farace, 34 was indicted for being involved in an alprazolam tablets manufacture and distribution scheme.

He sold the drugs on the dark web, with all transactions being made in bitcoin. Additional digital currency money laundering transactions were made to conceal the sources.

Article Originally Published:

By ELIZABETH GAIL at Coincentral

 

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Why You Need to Get Onboard With Blockchain!

Why You Need to Get Onboard With Blockchain!

Blockchain tech – so revolutionary in nature that some are calling it the “new internet.” It has applications in just about every industry, and has completely altered the way we think about internet security, the processing of information, and the speed of transactions.

Blockchain is the technology that supports the digital currency  or cryptocurrency called Bitcoin –

however this is not what it is really about as it has a far wider scope of applications and is being commercialized in a growing number of areas.

It has generated much interest in technology circles and beyond, because of the new possibilities it opens up in financial services, the public sector and other areas.

According to sites like BitFortune.net, blockchain tech is definitely worth keeping an eye on due to the myriad of benefits it provides.

Blockchain and Bitcoin are not the same thing – Bitcoin is implemented using blockchain technology, but blockchain technology can be used in contexts much wider than Bitcoin or other cryptocurrencies. so when we are talking about the blockchain we are talking about a combination of a number of technologies, these including:

  • Distributed ledgers.
  • The blockchain data structure.
  • Public key cryptography.
  • Consensus mechanisms.

Part of what makes it so exciting is that it is completely open source. As a result, there are already a number of interesting blockchain apps, and the number is growing daily.

The technology is so secure that it is already being used by DARPA to secure military data. Various governments around the world are working on ways to use the tech to protect their own data.
The tech is tamper-proof, and the data stored within it is permanent. It cannot be erased or altered, and this is what makes it so enticing to those needing more secure networks.

But there is more, folks. (Okay, so that sounds a bit like an infomercial, but the benefits are real nonetheless.) Transactions can speed across the network – taking only as much time as it takes for them to be authorized.

The blockchain cannot be described just as a revolution. It is a tsunami-like phenomenon, slowly advancing and gradually enveloping everything along its way by the force of its progression.

William Mougayar

The system runs without the need for an intermediary, and this reduces the time it takes to execute transactions. This, and the unique way that the tech works, means that costs are significantly reduced as well.

What makes it so revolutionary is that the information is spread across every computer within the network. With Bitcoin, that means the data is securely “backed up” over thousands of computers.

Now, it is unlikely that banks will entrust their data to a public network in the same way, but they have been working on creating networks of their own instead.

The potential savings in terms of cost and time are extensive. If you want to learn more about these savings, check out the infographic below.

 

Why You Need to Get Onboard With Blockchain!


Why You Need to Get Onboard With Blockchain!


Visit bitfortune.net . for more interesting Infographics

Guys did an amazing job and was allowed to share.


 

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