Month: September 2020

When can you trade forex?

Forex market is open 24 hours a day and 5 days a week. However, it does not mean it is always active. Let us check what a 24-hour day in the forex world looks like. The forex market is divided into four major trading sessions: the Sydney session, the...
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Who Trades Forex?

The forex market is enormous in size and is the largest market with millions of participants. Hundreds of thousands of individuals (like us), money exchangers, to banks, to hedge fund managers everybody participates in the forex market....
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Why Trade Forex?

So, why trade Forex? There are many reasons to trade in Forex. If we ask four different people, you might get more than four different answers. Primarily, making money is the most frequently cited reason for why trade Forex. Let us now consider the following reasons why so many...
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What is Forex?

Forex (in simple terms, currency) is also called the foreign exchange, FX or currency trading. It is a decentralized global market where all the world’s currencies trade with each other. It is the largest liquid market in the world. The liquidity (more buyers and sellers) and competitive pricing (the...
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Risk of Ruin

Even where a trader/customer’s medium to longer term view of the market may be ultimately correct, the trader may not be able to financially bear short-term unrealized losses, and may close out a position at a loss simply because he or she is unable to meet a margin call...
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Transactional Risk

Errors in the communication, handling and confirmation of a trader’s orders (sometimes referred to as “out trades”) may result in unforeseen losses. Often, even where an out trade is substantially the fault of the dealing counter-party institution, the trader/customer’s recourse may be limited in seeking compensation for resulting losses...
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Leverage Risk

Low margin deposits or trade collateral are normally required in Foreign Exchange, (just as with regulated commodity futures). These margin policies permit a high degree of leverage. Accordingly, a relatively small price movement in a contract may result in immediate and substantial losses in excess of the amount invested....
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Country and Liquidity Risk

Although the liquidity of OTC Forex is in general much greater than that of exchange traded currency futures, periods of illiquidity nonetheless have been seen, especially outside of US and European trading hours. Additionally, several nations or groups of nations have in the past imposed trading limits or restrictions...
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Counter-party Default Risk

Over-the-counter (“OTC”) spot and forward contracts in currencies are not traded on exchanges; rather, banks and FCM’s typically act as principals in this market. Because performance of spot and forward contracts on currencies is not guaranteed by any exchange or clearing house, the client is subject to counter-party risk...
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Settlement Risk

Settlement risk occurs because of the difference of time zones on different continents. Consequently, currencies may be traded at different prices at different times during the trading day. Australian and New Zealand Dollars are credited first, then the Japanese Yen, followed by the European currencies and ending with the...
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