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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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AvaTrade introducing 3 new crypto pairs

crypto trading with Avatrade

AvaTrade introducing 3 new crypto pairs – updating 3 others

AvaTrade has yet again improved their cryptocurrency trading offering.

AvaTrade is introducing three new cryptocurrency pairs: NEOUSD, EOSUSD & MIOTAUSD in addition to the 15 crypto assets already on offer.

These new pairs have been available since July 1st, 2019 and provide an excellent opportunity to diversify your clients’ portfolios and increase their exposure to this vibrant 24/7 market.

AssetTypical SpreadLeverageMarginMin Nominal Trade Size
NEOUSD1.5% Over-market2:0150%10
EOSUSD2% Over-market2:0150%10
MIOTAUSD1.5% Over-market2:0150%10

To unify their cryptocurrency instrument labels, They are relabeling their existing Ethereum, Ripple & Litecoin instruments, by replacing the existing instruments with new USD labelled ones:

AssetOld SymbolNew Symbol

These new pairs have also been available since July 1st,

The trading conditions for each one is identical to those of the older respective assets they replace.

Effective immediately, new positions are only available on the new pairs.

Avatrade Clients will not be able to open new positions on the old assets, but those already open will remain unaffected until July 29th.

Existing positions on XRP, ETH and Litecoin-mini that remain open on July 29th will be automatically replaced with corresponding positions on the new pairs, , at the same opening price and at no cost to clients.

as any broker that values their clients would do , Avatrade makes sure that the clients will not be affected by the change.

Visit Avatrade NOW

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Neteller Launches Cryptocurrency Exchange Service

Neteller Launches Cryptocurrency Exchange Service

Neteller  one of the most known Digital fiat currency wallet provider , has started allowing its users to buy, sell, and hold cryptocurrencies including BTC, BCH, ETH, ETC, and LTC.

They do this on the large scale with a pilot in 10 countries and soon another 50 countries to join . They understand that if you do this effort it will only succeed if you can do this on a global scale.

Neteller and Cryptocurrencies

Neteller is a service which is operated by Paysafe Financial Services Ltd.,



founded in 1999, Paysafe Financial Services entered the market with the mission to provide an online alternative to the known traditional payment methods.

Most of the traders aiming us now neteller as one of the companies through which we made our deposits and if we had any profits also our withdrawals. A couple of years ago they left the Forex and Binary industry behind since the charge-back issue became just too expensive.

But as any companies knows, if you do not adept you die. The binary option market is all but dead and the Forex industry has moved also into the directions of the cryptocurrencies. thus, neteller understands that this is where the future is.

So Lasts week they announced that they are now offering a wallet with buy and sell cryptocurrency options.

As of today, Neteller users can buy, hold and sell cryptocurrencies via a recognized cryptocurrency exchange including bitcoin, bitcoin cash, ethereum, ethereum classic and litecoin, purchased using any one of 28 fiat currencies available in the Neteller wallet.

It may not seem so exciting but for many users that love this service it actually is. More and more currencies will be added making them an true exchange in the near future.

Now one is able to fund their neteller account through many different means (Mobile, Epay, Paysafecard, local bank deposits, and bitcoin)

We think that will make the threshold for many people, who would want to buy or sell cryptocurrencies, lower. This in return is a good thing for the overall acceptance of the cryptocurrencies in the mainstream of every day life.

Conditions for buying and selling cryptocurrencies through Neteller

The rates offered are somewhat in the lower middle of the current market making them go for the save route. The average market rates on the major cryptocurrency exchanges differ all in all not that much anyways, as this is not the main reason to choose to buy Bitcoin through Neteller

The minimum cryptocurrency purchase or sale amount is “approximately equal to 10 EUR,” the firm clarified, adding that the maximum amount depends on the transaction limits associated with each account.

When You open an account with Neteller you have to choose your default currency. This is of course for most people in accordance on their geographical locations, people in Britain will go for the pound most Europeans go for the euro and pretty much the rest of the work goes for the US Dollar, thou other currencies are available

The fee is 1.5 percent for purchasing and selling cryptocurrencies from wallets with EUR or USD as the default currency.

The fee rises to 3 percent for wallets with other default currencies.

Neteller  | Why is this a good move for neteller and one that we should expect from other online Payment providers as well ?

At this moment till last week Neteller users can pay, get paid on thousands of sites, and send money around the world through their system.

The company claims to have “millions of point-of-sale, ATM and online locations” for users to withdraw or spend their cash.

Last July 25, Paysafe ( which as you remember is the company that owns Neteller and Skrill)  announced that another digital wallet provider in its group, Skrill ( formerly known as moneybookers), started allowing customers to “instantly buy and sell cryptocurrencies, including bitcoin, bitcoin cash, ether and litecoin, using any one of the 40+ fiat currencies available in the Skrill wallet.”

We could now see that this was like their test run on this concept.

We do not know the numbers that Skrill produced since they offered this service but it must have been encouraging enough for Paysafe to include their flagship brand in this endevour.

We will see where this leads but we are hopeful that this is the next step in global acceptance to the cryptocurrency revolution. Let me know what you think

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The basics of trading that one should know

The basics of trading that one should know

Things you should be aware of before you start

The currency trading industry and now also the cryptocurrency trading industry have gone through enormous volatile times the last couple of years. Now with trump and its trade wars. The fast rise and somewhat recline of the cryptocurrencies and the fast pace of international politics and economies that create high rises and steep fall of the currencies.

So what does it all mean and what can you do before start to trade on these news headlines.

Good brokers like LegacyFX and UBCFX provide the traders with the latest market news and updates on a continuous basis but if you are new to trading you still have no idea what to do with this.

You start by understanding that the involves a high degree of risk, including the risk of losing you hard earned money. Besides the ones that were lucky enough to have bought Bitcoin a couple of years back and cashed in in the end of 2017, most people don’t get rich overnight.

You have to understand that you only trade with money that you are able to lose, going hungry because you want to open a trade is not the right wy to go about it.

So, What is Forex?

You should by now understand that the value of currencies goes up and down every day.

This in general becomes apparent the moment you go on vacation and what you bought last year with your money now is not the same amount you get today at the exchange.

This is on a large scale, what a lot of people do not know is that there is a foreign exchange market – or ‘Forex’ for short – or “FX” for even shorter, where you can potentially make a profit from the movement of these currencies.

The most known Trader is George Soros who made a billion dollars in a day by trading currencies. This is of course on a scale that we are not able to reach and you need a huge amount of money to begin with. Still he made a billion in one day!!

The internet has played a huge part in making trading in currencies accessible for the masses. You also do not need huge amounts of money to actually do this. Now keep in mind that if you make 10% profit on your investment but the investment was just $50 you basically just end up with $55. still no bank will give you 10% interest on your money.

Many people and I am talking millions are now trading every day, most do this on the side and don’t do this as a full-time job, but there are today enough people that are full time traders and making enough money to live comfortably.

Retail forex market needed Brokers

The Forex market for the retail market was born, it started around 15 years ago to become more serious as technologies advanced and the stream of information became almost instant, this is important for trading as one second can make the difference between profit or loss.

So, the moment the technology was there the people that wanted to trade were there all that was needed were the Forex brokers that offered the platform for trading.

There are latterly hundreds of companies of not thousands that offer this service and there are good ones like LegacyFX and there are scams (these tend to not last long)

Forex explained in short

The Forex market is the largest financial market on the planet and has been for many years now.

Its average daily trading volume is more than $4 trillion. (just let that number sink in for a second). Of this total amount around 5% is the retail market meaning traders like you and me. Still 5% of 4 Trillion is still a number with a lot of zeros behind it.

If you compare that with the New York Stock Exchange, which only has an average daily trading volume of $55 billion. You truly see the size.

To give you another example:

if you were to put ALL of the world’s equity and futures markets together, their combined trading volume would still only equal a 25% of the daily Forex market. Insane right?

Why does this even matter?

It matters because there are so many buyers and sellers that transaction prices are kept low. To explain how trading the Forex market is different than trading stocks, here are a few major benefits.

  1. Most Brokers don’t charge commissions – you pay only the bid/ask spreads.
  2. There’s 24hour trading – you decide when to trade and how to trade.
  3. You can focus on your currencies and become experts in only those pairs that you follow instead of following and selecting out of 5000 stocks
  4. You can trade on leverage, (something to be very aware of as it can magnify potential gains but also your losses).
  5. Forex is accessible for almost everyone– you don’t need a lot of money to get started
  6. In the Forex market you can trade on Demo accounts to learn before you commit your money

How is Forex traded?

The mechanics of a trade are virtually identical to those in other markets. The only difference is that you’re buying one currency and selling another at the same time.

This is also the reason as to why the currencies are quoted in pairs, like EUR/USD or USD/GBP.

The exchange rate represents the purchase price between the two currencies.


The EUR/GBP rate represents the number of GBP one EUR can buy (relevant now with all the Brexit issues going on) . If you think the Euro will increase in value against the British Pound, you buy Euros with British Pounds. If the exchange rate rises, you sell the Euros back, and you cash in your profit.

Now the same works for strading Bitcoin, ethereum, Litecoin or other cryptocurrencies. this has become an entire new market and has introduced many people to Forex . you should here be also aware that trading cryptocurrencies is like regular trading so you will be able to lose great sums of money.

the Best thing i found about trading cryptocurrencies is that the Leverage by default tends to be very low which makes the risk of losing it all much smaller.

Sounds simply enough?

Why does not everyone Trade.

The same could be asked as to why not everyone plays poker, you can make money. The comparison between the 2 is actually closer than you might think.

All traders that are successful will tell you that 80% of successful trading is psychology and the other 20% is research. It takes time to get the research down, but it can take a lifetime to master the psychology.

People tend to do things differently when real money is on the line and are accepting losses in the hope that the trend will reverse or taking out profit too early because they don’t want to lose what they just have gained. In short, the psychology is the hard part.

One should be aware that you can loose real money and a lot of it very fast if you don’t know what you are doing.

Now most Good Forex brokers offer some educational tools, some more than others that will teach you how to trade. There is also something that is called social trading that will allow you to follow other traders and see what they are doing in order for you to learn and make money at the same time.

So here are some ground rules for those that look to start trading

  1. Get involved in the market, watch read and listen to the news to understand what is happening
  2. Go through a trading course ( a good one is here)
  3. Open a demo account and trade at least a month (my advice to do this even longer)only on this before you even think about trading with real money.
  4. Check out social trading, there are some options for this, this broker offers this also.
  5. Try with an amount that you are able to afford losing. See this as your tuition money.
  6. Take it slow, don’t become greedy and follow the basic rules

Basic Rules (there are many more but start with these)

  1. The trend is your friend
  2. Don’t add money to a losing position
  3. Don’t trade on too many different currency pairs
  4. Trade only with a good broker
  5. Don’t open to many positions (no one needs 100 positions a day)
  6. Develop your strategy and stick to it.
  7. Know that NO ONE is 100% of the times right, everyone loses some.
  8. Last but not least, don’t trade with money you cannot afford to lose.

Now all that I want to say is good luck.  😊


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