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Australian Financial Services (AFS) Licence 246566

Risk versus Reward in Trading

In the Forex market, risks might be great, but the rewards can be great too.

The Forex market is different from other markets. The speed and huge size of the market mean it changes continually. Forex is not the same as any other market in the financial world; it is not able to be controlled. This makes it risky – increased risk means chances for a higher profit, also for higher loss.

There are many different ways to invest in the Forex market. However, before you decide to get involved, you should think about what result you want from your investment and your level of experience. Trading foreign currencies is demanding.

Do not invest money you cannot accept to lose.

What is risk capital?

Risk capital is the money that easyMarkets suggests you use for trading in the market. It is money you have that you do not need for day to day living and you can afford to lose.

Can I reduce risk?

You can reduce risk in many different ways. easyMarkets has tools to help you make the most of your trading.

First it is important to understand the market. easyMarkets has training programs that help you learn about trading. Customers are trained for free. We believe that good training is necessary for trading success. You can deposit a small amount and do some small trades at first to help you understand how the market operates.

Another way to reduce risk is to try to judge what direction a currency might take by studying what has happened in the market until now and the causes of changes in the market. This is called forecasting. Forecasting helps you to develop an idea what might happen in the market in the near future.

You can also place Stop Loss and Take Profit limits on your trades. This reduces the risk of losing more than you feel comfortable with. Stop Loss and Take Profit help you to control your trading. When you place these limits on your trades, you do not have to watch the computer screen every minute.

Leveraged trading

The leveraged nature of the Forex market means that risks and rewards are higher. Any movement in the market will have an effect on what you win or lose. With leveraged trading, the effect can be increased on a big scale.

You can win a great amount, or you can lose a great amount. This is why it is important to understand the market. It is important to use methods that limit your risk. Learn to be a disciplined trader.

Is foreign exchange trading right for me?

Foreign exchange trading is not the right investment for everyone. If you are responsible and trade to the limits you set for yourself, you will find there are rewards. But you must take risks to get rewards. The risks must be right for you.

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