FX Risk Factors | ForexGen

One of the first things most traders hear when they begin their foreign journey is the fact that forex trading is risky. Many new traders choose to pay little attention to all the risk warnings and continue. I was personally the same at the beginning because I so eager to get started!It is very important to fully understand the forex risk factors as to be a successful FX trader, you need to know how best to minimize them

Perhaps the single biggest risk factor in FX trading is the use of too much leverage! I have spoken to many traders who start trading with as little as $100 on a mini forex account. I always encourage these traders not to do it and to learn more about proper risk management. $100 with a mini account will almost always have just one single outcome, a margin call.Let’s look at why this is. If you have 100:1 leverage from your broker to open a GBP/USD position for 1 minilot is going to cost $10 in margin. This would leave $90 for trading. With a 1 mini lot GBP/USD position each pip is worth $1. This would mean that only a 90 pip movement in the wrong direction would mean result in a margin call.