Forms of Forex Trading Risk and Common Investor Mistakes

Investors in the Forex market often talk about how to make money in the Forex market, but when we look at it from another perspective, we regard the fluctuations in the global Forex market as risks. Whether it is an individual, bank, or enterprise participating in Forex transactions, as long as there is Forex, there is Forex risk.

One of the manifestations of Forex risk is: Forex transaction risk. Forex risk arises due to the exchange of domestic currency and foreign currency. The risk borne by Forex banks that engage in Forex trading is mainly Forex risk. Enterprises other than banks also have the same risk when they make loans or borrowings in foreign currencies and carry out Forex transactions accompanying foreign currency loans and borrowings. Risks also exist when individuals buy and sell Forex.

The second manifestation of Forex risk is: exchanging domestic currency with foreign currency for future Forex transactions. Since the Forex rate applicable to future transactions is not determined, there is a risk. This is a risk that occurs when general enterprises conduct trade transactions and non-trade transactions denominated in foreign currencies, so it is also called "transaction settlement risk."

The third manifestation of Forex risk is: the issue of how to evaluate claims and debts in domestic currency when an enterprise performs accounting processing and final settlement of foreign currency claims and debts. For example, when handling final accounts, evaluating claims and debts, due to different applicable exchange rates, there will be differences in book profits and losses, so it is also called "evaluation risk" or "Forex translation risk."

The fourth manifestation of Forex risk is: economic risk - refers to the risk that an enterprise or individual's future expected income may be lost due to changes in exchange rates.

Many people invest in gold and silver with the idea of profit. They feel that the precious metal market may give them the opportunity to quickly double their wealth, but they may also quickly end up losing all their money. The main reason for this situation is that investors have some irrational investment shortcomings and technical errors.

1. Go against the trend and grab a rebound: Many people may be disgusted with this issue. Can't you grab a rebound? Of course you can grab it, but you must master the correct method. Otherwise, it will be like licking blood from the edge of a knife. For example, when an extremely sharp knife falls from the sky, when should you catch it? The better way is to wait until it falls on the ground and swings still. Otherwise, you will definitely be scarred.

Solution: Grabbing a rebound requires certain skills. This skill is the experience accumulated over the years. Inexperienced people do not need to take risks. It is more valuable to follow the trend. While accumulating experience, you must constantly cultivate your own "trading sense". In the end, it must be very important to pay attention to the management of funds when participating in rebound operations.

2. "All-weather" operation: Many investors who have just entered the Forex market want to be all-round players. They will do more than one trade at a time and short sell at other times. They are very busy, but the amount of funds is getting smaller and smaller. There may be some masters who can handle the market with ease, but they are not "all-weather" traders. Here I would like to advise "all-weather" operators: You can't make all the money in the world, otherwise Wall Street will be yours in a year and a half.

Solution: In a long market, go long, and don’t think of reverse operations. In a short market, stick to short positions, and taking a break is also an operation.