FOREX TRADING RISK

Managing Forex Trading Risk

Managing Forex Trading Risk

Introduction

Forex trading is certainly a volatile market with which you can obtain high profits but also make substantial losses. If one approaches the Forex without a scientific basis will undoubtedly have equal probability of loss of gain whereby to have a positive differential in the sum of the winnings must be greater than that of losses. When it comes to risk, Forex trading cannot be considered different from other types of investments. This research papers focuses on the management of the Risk at Forex market, in short managing Forex trading risk.

Background

The Forex market is highly speculative and for this reason it is practiced by a multitude of unquestionable reliability that companies can defraud investors with false promises and money making system failures. Although this phenomenon has been partially contained is always very good to be cautious. It is easy to open a trading account online, and for this reason some companies are not accredited can create sites, pretending to be brokers and disappear with the money of others.

There is always a risk wehen trading on the Forex market. All investments transactions at every moment estimated over the price to avert. Changes in tariffs by the market situation and sudden reversal in the political situations are just some examples of possible risk factors (Saettele J., 2008, pp. 135).

Forex Trading Risk occurs at two levels:

First, depending on the currency in which the export contract, the company may lose money or experience a decline in its profit margin,

Secondly due to international competition, the price of the product or service offered to a foreign buyer may become less competitive if the currency of a potential supplier exporter in another country than UK devalues against the euro.

Forex Trading Risk exists if the currency selected for the settlement of exports is not the euro. For countries that are in the euro area, the problem does not arise. Recall that several member countries of the European Union are not part of the euro area such as the United Kingdom and United Sates. The choice of invoicing currency accordingly plays a very important role. If your company chooses to be settled in U.S. dollars, for example, the exchange rate at settlement will be different in the exchange rate at the time of billing. A company runs the risk that the currency (U.S. dollar) decrease between the time and billing occurs when the actual settlement occurs (Sager M., and Taylor M., 2006, pp. 45).

Questions and Objectives

The following are the questions and objectives of the paper.

What are the risks of Forex? Although trading the Forex market can make us gain a lot of money there are many risks that we must in all cases to consider.

Risks due to fluctuations in exchange rates (Exchange rate risks)

There are risks due to price changes that may occur from the moment we open a certain position. Prices may fall into the way expected, and this can lead to loss of principal ...