The risk of foreign exchange trading!

Many people are conductingforeign exchangeAt the time of trading, I was not very clear about the risks of foreign exchange. NowForeign exchange transactionsWhat are the main risks in?Foreign exchange as an investment method definitely carries risks, and what we need to consider is to try our best to avoid risks. Today, let's explain to everyone, What are the risks of foreign exchange trading?

1·Margin risk

The biggest function of foreign exchange leverage is to help investors magnify their margin through leverage, manipulate more funds, and obtain more returns. However, foreign exchange brokers also have their own risk control system. If traders keep not closing their positions, and when losses occur, the available margin becomes lower and lower, margin calls will occur. If there is no call, there is a high possibility of position breaches.

A lever is a double-edged sword. In the same position, the greater the leverage, the smaller the margin occupation, the more available margin, and the greater the number of risk points that can be resisted. The larger the position that can be established with the same funds. This makes it easy for traders to develop desires and greed, neglecting fund management and position control, and engaging in heavy or full position trading. So small price fluctuations may lead to additional margin calls, which can cause investors to pay more margin. Under volatile market conditions, excessive use of leverage will result in losses exceeding the initial investment.

2·Market risk

Foreign exchange market all day24It operates hourly and has no limit on its trend. When there are severe fluctuations, it can be adjusted within a day

There will be a difference from heaven to earth because there are many factors that affect the trend of foreign exchange, and no one can accurately judge it

The trend of foreign exchange rates poses market risks in foreign exchange transactions.

3·Exchange rate risk

The simplest exchange rate risk is exposure to dynamic changes in currency value, especially depreciation risk. When a country intentionally adjusts the exchange rate of its own currency relative to another country's currency, currency depreciation occurs.

Currency depreciation is a monetary policy tool used by countries with fixed exchange rates. Currency depreciation is determined by the government issuing the currency. One of the main reasons for a country's currency depreciation is to prevent trade imbalances. When a country's currency depreciates, the price of its exports decreases relatively, making its exports more competitive in the global open market. If a country's currency depreciates, it may have to raise interest rates to control inflation.

In addition, another significant foreign exchange risk associated with a country's currency depreciation is psychological. Currency depreciation can be seen as a signal of economic weakness, which may endanger a country's credibility. Sometimes, depreciation may lead to the devaluation of other countries' currencies to cope with the domino effect of neighboring countries' currency depreciation. This situation will only exacerbate the economic problems in the global market.

4·Network transaction risk

Foreign exchange margin trading is mainly conducted through the internet. Due to the inherent characteristics of the internet, there may be a phenomenon of inability to connect to the systems of foreign exchange traders, which may lead to huge losses, and foreign exchange traders are not responsible for this.

The characteristic of foreign exchange margin trading lies in its small capital and high profit, which often leads investors to pursue profits excessively while neglecting risks. Remind foreign exchange investors that there are risks in the foreign exchange market and investment needs to be cautious.

Any investment has risks, and risks are related to its profits. Therefore, if there are risks, everyone should not be afraid. It is important to find ways to avoid risks to the greatest extent possible.

5·High leverage brings high risk

Most foreign exchange platforms are1:400Double the trading leverage, high leverage stimulates people's desire to create wealth in a short period of time. Becoming greedy and forgetting to control the margin ratio of positions has become increasingly low, resulting in a closer time to the time of the position being closed.

Although each investment carries risks, the use of leverage in foreign exchange trading also amplifies the amount of losses. Especially when using high leverage, even a slight difference from your trading trend can bring huge losses, including all account opening funds. So try to use funds other than the necessary funds for daily life, and investors should learn to light their positions and make good stops during trading.

6·Exchange rate risk

The simplest exchange rate risk is exposure to dynamic changes in currency value, especially depreciation risk. When a country intentionally adjusts the exchange rate of its own currency relative to another country's currency, currency depreciation occurs.

Currency depreciation is a monetary policy tool used by countries with fixed exchange rates. Currency depreciation is determined by the government issuing the currency. One of the main reasons for a country's currency depreciation is to prevent trade imbalances. When a country's currency depreciates, the price of its exports decreases relatively, making its exports more competitive in the global open market. If a country's currency depreciates, it may have to raise interest rates to control inflation.

In addition, another significant foreign exchange risk associated with a country's currency depreciation is psychological. Currency depreciation can be seen as a signal of economic weakness, which may endanger a country's credibility. Sometimes, depreciation may lead to the devaluation of other countries' currencies to cope with the domino effect of neighboring countries' currency depreciation. This situation will only exacerbate the economic problems in the global market.

7·Operational risk

Another risk related to foreign exchange trading is operational risk. Operational risk occurs in the internal processes, systems, and personnel of foreign exchange brokers. Usually, operational risk and management are parallel. For example, when foreign exchange brokers have a strong management team, the level of operational risk will decrease. On the contrary, if the management of the broker is insufficient, operational risk will increase.

As a foreign exchange trader, it is not easy to determine the operational risks faced, but it can be minimized by studying and evaluating the operations of foreign exchange brokers.

8·Broker Risk

In China, foreign exchange transactions need to be operated through the platform of foreign exchange brokers. Therefore, it is necessary to do your homework in advance and find a reputable foreign exchange broker. Some foreign exchange brokers are not regulated, so the safety of traders' funds cannot be guaranteed. Some large foreign exchange brokers are regulated by mainstream regulatory agencies, while some smaller foreign exchange brokers choose offshore regulatory agencies for supervision.

One reason why some foreign exchange brokers choose to operate offshore regulatory businesses is that they can significantly reduce overall operating costs. Because the cost of obtaining and maintaining regulatory licenses can be very high. In addition, capital requirements set by regulatory agencies may create an entry barrier for many brokers who are unable to raise the necessary capital.

Generally speaking, it is best to choose foreign exchange brokers supervised by mainstream foreign exchange regulatory agencies for cooperation. The following table lists several mainstream foreign exchange regulatory agencies in the world.

United States: ProductfuturesTrading Committee（CFTC）National Futures Association(NFA)

UK: Financial Services Regulatory Authority(FCA)

Australia: Australian Securities and Investments Commission(ASIC)

New Zealand: Financial Services Enterprises(FSP)

Canada: Investment Industry Regulatory Organization(IIROC)

Hong Kong: Hong Kong Securities Regulatory Commission(FSC)

Singapore: Financial Supervisory Authority of Singapore(MAS)

Japan: Department of Finance and Economics(FSA)

9·Fraud risk

One type of risk that foreign exchange traders need to understand is fraud risk. In the early stages of foreign exchange margin trading, fraud was rampant in the foreign exchange industry. In recent years, with the tightening of global financial regulation, significant progress has been made in eliminating unethical brokers.

In order to reduce the chances of collaborating with unethical brokers, traders should make due diligence on the foreign exchange brokers they want to collaborate with.

The above are the relevant answers to the risks of foreign exchange trading. Domestic investors can engage in foreign exchange trading. However, due to the fact that domestic foreign exchange trading companies are hardly subject to national regulation, and domestic foreign exchange transactions are not protected by national laws. Therefore, if traders want to conduct foreign exchange trading in China, they can only choose a reliable foreign exchange trader such as Jinrong Global . I have chosen a reliable foreign exchange trader.

Any investment has risks, and risks are related to its profits. Therefore, if there are risks, everyone should not be afraid. It is important to find ways to avoid risks to the greatest extent possible. I hope everyone can invest successfully!

10·Diversified investment

There are many tradable currencies in foreign exchange, but there is no need to hold multiple currencies simultaneously. Your disk cannot hold multiple currencies at the same time, even if you can see them4About one, but it is also a very small chart, which is not conducive to analyzing and watching the trend. Only one currency can be selected for trading from multiple currencies. To short, choose the weakest currency, and to long, choose the strongest currency.

11·Overdependence indicators

Many novice investors will have various indicators on the marketMACD、KDJ、RSI、MAStacked disks such as Bollinger lines, etc. Looking at the disk, it is very chaotic and not concise enough. The indicators that are rampant online are actually used by very few people, and the indicators are relatively lagging behind the market. The indicators change with the market. Long periods of focusing on an irregular indicator can interfere with self judgment. Suggest leaving only what you know how to use and making the disk as concise and clear as possible.

The above is a brief introduction to foreign exchange risk, hoping to be helpful to everyone. It is recommended that investors generally choose legitimate and reliable distributors, which need to be established as a brand broker for more than ten years5A national license plate, where funds are subject to very strict supervision and are very safe, with foreign exchange trading options,goldBeautycrude oil，A50Other countriesstock market indexetc.200Multiple varieties with low spreads, and the minimum transaction for each variety is0.01Hand, very suitable for mainland traders, more about foreign exchange issues, you can chat privately!