Trading the Forex currency market, like any other investment, involves certain risks. Some of the main risks associated with this market are the following.

 Main risks of the Forex currency market

Volatility risk

In the Forex market, volatility is very high, due to the large number of factors  that influence the value of currencies.

Leverage

One of the risks in the foreign exchange market comes from leverage, which is a tool that gives operators access to manage large amounts of capital with minimal investment. However, the excessive use of this tool can cause significant losses that exceed the initial investment.

Interest rate risks

Interest rates can affect exchange rates between countries. If a country raises its interest rate, its currency will strengthen due to an increase in investment in that country. On the other hand, if interest rates fall, the currency will weaken as investors withdraw their investments. This can cause prices in the Forex market to change drastically.

Transaction risk

The risk in transactions is associated with the difference between the time zone of the beginning and the closing of a contract. Forex trader operates 24 hours a day, 5 days a week, exchange rates can change before trades have been settled. For this reason, currencies may trade at different prices at different times during those trading hours.

Risk between the parties

The risk between the parties is associated with the possibility that the counterparty in the middle of a transaction will not fulfill its obligations in the contract.

These are just some of the main risks that exist when trading the Forex currency market. It must be clear that the Forex market is a highly volatile market. So a this market is not suitable for beginners or for people who want to earn easy money without any experience.