Again, given the five reasons stated previously, but let us delve a little more into why Forex is labelled as High Risk.
- Uncontrollable market risks: This refers to the volatility of the market on which you are trading.
- Leverage risk: Traders usually seek to maximise their earnings by leveraging risks. This can potentially result in significant losses.
- Counterparty Risk: The Counterparty is the entity with which you execute Forex trades. If this entity declares bankruptcy, no one is compensated. This is also harmed as a result of ineffective regulation implementation/oversight.
- Liquidity Risk: Weekends and bank holidays are typically times of low liquidity.
- Online Transactions: Due to the wide diversity of currencies and the possibility of fraud, as credit cards are used to conduct the transactions.
