Knowing Forex Trading And the risk

You may have heard the term forex and forex trading very often, especially now that many new brokers are actively promoting their services. Have you ever met someone who said that he did forex trading? Or even you yourself have difficulty explaining what forex trading is even though it is struggling?

Although many people have started to know what forex trading is, but the notion of extensive forex trading and its ins and outs are rarely peeled off. In fact, by knowing forex trading more deeply, we can find out the benefits and risks in it.

Forex Trading


Literally Know Forex Trading And Practice

According to the sentence, forex comes from the word Foreign Exchange, aka foreign exchange currency. While trading is an English word which means trading. Literally, forex trading means foreign exchange trading.

Hearing the explanation above, often follow up questions: So, forex trading is like exchanging money in a Money Changer? Well, this is where the misunderstanding arises. People who are familiar with forex trading will know that there is a fundamental difference between forex trading activities and simply exchanging money in Money Changer. These differences include:


Forex Market Always Open

Unlike the Money Changer which has limited working hours and only serves certain currencies to be exchanged for local currency, doing forex trading means being part of currency exchange globally. Broadly speaking, there are 4 highly influential forex market sessions in the world, namely the Sydney (Australia) Session, Tokyo (Asia) Session, London (Europe) Session, and New York (American) Session. If you miss opening a position in 1 session, then there is still a chance to make a profit in other sessions.


Forex is always traded in pairs

Through forex trading, we will meet currency pairs such as EUR (Euro) / USD (US Dollar), USD (US Dollar) / JPY (Japanese Yen), and so on. Currency pairs that are often used in forex trading are often referred to as major pairs. They are chosen because the price movements are easily analyzed, and have a favorable range in certain trading sessions.

There are no physical transactions

When making transactions in Money Changer, we will get money converted according to the prevailing exchange rate. For example, we bring cash in the amount of 1,500,000 Rupiah to be exchanged to US Dollars. When the buying rate is 15,000, we can take home 100 Dollars.

In forex trading, we don't have to bother coming to Money Changer and bringing cash. All transactions are only carried out in the form of contracts, through a platform provided by the forex broker. Whether at home, office, canteen, park, or wherever you are, as long as there is internet access, forex trading activities can be done.

There is Margin and Leverage

If you exchange money in a Money Changer, we must have a certain amount of money in accordance with other currencies that we need. While in forex trading, we are given a facility called Margin and Leverage. Trading with Margin allows you to get a greater profit opportunity than real capital. For more information, you can go to the Margin article in Forex Trading.

Forex Trading is an investment instrument

After getting to know forex trading based on its literal meaning, now we must understand that forex trading is an investment instrument. The word investment instrument must be emphasized, because in forex trading, we will work as investors, not gamblers.

What is investment?

(Also read: What Is Investment?)

Rationally, we will only make an investment after fully understanding how it is possible to profit and recognize the trading risks that are emphasized. Today, there are a lot of frauds under the guise of forex investment. These frauds usually target beginners who are interested in getting to know forex trading, because they are tempted by the unlimited profits promised in the forex world.

Basically, investment activities always have risks that are commensurate with the possibility of profit. So, if there is a promise of 100% forex trading or free loss, do not be easily provoked because it is only a mainstay sentence of fraudsters who want to 'take away' your money.

Know the Forex Trading Risk

If you want to know forex trading as an investment, then you should not just look at the profit side. Risk also needs to be measured so that you can anticipate it as well as possible. So, what are the risks of forex trading that you must watch out for when you are just jumping in as a forex trader?

Risk of Volatility

Volatility is the amount of distance between fluctuations or fluctuations in currency prices. The higher the volatility, the higher the risk of failure you get. Although it can bring big profits if it can be used wisely, analyzing prices when high volatility is not an easy thing for all traders to do. If you are still a newcomer, then the difficulty in dealing with volatility does not only come from analysis and speed of responding to rapid price movements, but also psychological aspects that are easily provoked by price fluctuations.

Risk of leverage

Leverage is a friend and opponent for forex traders. With leverage, the capital needed to start forex trading becomes smaller. However, many traders misuse this facility to increase the position of origin. If this is the case, then the risk of loss is greater, because they are not aware if the bigger position also brings their account closer to the possibility of Margin Call.

Risk of Scam Brokers

In doing forex trading, we will get acquainted with a party called a forex broker. You must be careful when choosing a broker, because it will be an intermediary that connects you to the forex market. If you choose the wrong broker, then there are many adverse risks that will burden your trading.

Several years ago, forex brokers were still limited and difficult to find. But nowadays, very many forex brokers are popping up. Beginner traders must be more careful in choosing a trusted broker.

The emergence of bad thoughts is one of the risks of forex trading from the psychological side. Everyone has different emotional resilience, and it takes people with steel mentality to explore forex trading.

Actually, this psychological pressure can be avoided. Because in reality, there is no relationship between the debt debt between the broker and the trader that is billed, only leverage is given. The thing that causes forex trading is difficult if the traders are too excited to borrow other people's capital.

After getting to know forex trading and whatever the risks, you are now better prepared to become a trader. What needs to be remembered is, profits and losses are things that are commonplace. You can gain forex profit by continuing to learn and practice trading discipline. If you are still in doubt, many forex contests without a deposit can be a place to hone your skills.

If you are a beginner who wants to learn forex trading, besides the comment column, you can also directly ask our experts on the following beginner-specific question and answer forum.