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Saturday, January 12, 2008



High Risk InvestmentTrading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.Risks associated with trading margined foreign exchange include, but are not necessarily limited to the following:Market RiskRisk associated with the price movement of the currency pair traded resulting primarily from a change in economic and/or political conditions.Liquidity RiskRisk resulting from decreased liquidity of a currency pair usually due to unanticipated changes in economic and/or political conditions. Decreases in liquidity can result in "Fast Market" conditions where the price of a currency pair moves sharply higher or lower or in a volatile up/down pattern without trading in an ordinary step-like fashion. Although there may be instances when the market enters a "Fast Market" situation, it is important to note that under all circumstances.Excessive Leverage:FOREX gives the trader the ability to leverage the deposited funds by up to 200:1 ratio (this is under normal market conditions and can be reduced or increased at FOREX discretion). With this level of leverage, an investor has the potential to control a maximum margined position of up to $200,000 with an account balance of just $1,000.Leverage works for the investor when the position is favorable, but can work against the investor in a losing position. As a result, it is possible that the amount of margin initially pledged against a trading position, can be completely depleted. In fact, in general it is possible for the margin to go negative.Because excessive leverage has the potential to magnify losses, FOREX encourages its clients to only use an amount of leverage that the client feels comfortable with. Furthermore, trading discipline and sound money management principles should always be used when trading. Stop Loss Orders along with careful monitoring of positions and orders are essential ingredients to making sound trading decisions.

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