[D.Feder]

The Forex market is in itself not that risky. The way you invest is what makes it risky. Movement in currency is usually not volatile and dramatic. A country’s currency does not often suddenly drop 5% overnight as stocks can. There are usually warning signals and economic news, as well as other economic factors. If you go to a bank and buy a EUR 1,000 and leave it your drawer, its value will not change much overnight it certainly won’t vanish. A 1% move in the currency against you means you will lose EUR 10.

Forex becomes risky when using excessive leverage. If you open up a forex account and buy the same EUR 1,000 using leverage, you can now buy 1:100 meaning EUR 100,000, then a 1 % move against you will wipe you out your deposit.

1:100 leverage you lose EUR 1,000 – your whole deposit

1:50 leverage you lose EUR 500- half of your deposit

1:25 leverage you lose /EUR 250 – a quarter of your deposit

Sure, the reverse is also true; you could make that amount. The thing is most people get greedy and use too much leverage to have a few bad trades and then start losing everything.

Money Management and discipline is Key

[Franky]

Thanks for the tips. I’m still fresh to all of this, but it’s nice to have little guides like this to help. Thanks for sharing! 🙂

[James]

Never invested in the forex market before. But I have been interested in learning more about it. Plus, being able to exchange for other currency would be helpful whenever I plan to travel more.

[Author]

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