What is Forex Business?
Forex also called the Foreign Exchange is a Trading business, the forex market does the conversion of currencies from currency of one country to another. This is a global market used by Forex industries to trade at an average of 5-6$trillion on the daily scale. Forex can be termed as network of buyers and sellers converting and transferring currencies. The payment method used in this network is with the used of Forex Merchant Account to accept and pay funds through credit cards.
Why is Forex Business Considered High Risk?
Businesses are classified as High Risk and Low Risk Based on the amount of Risk involved in it. Here we will get to know why such business is trading in trillions daily considered high risk.
Large numbers of people are earning a lot through this market with the help of Forex Merchants. Forex trade takes places between pairs of currencies, which means there is a winner and a loser at the same time on either side of the trade.
There are few Risks involved in Forex Trading and we are here to inform you about it.
1. Uncontrollable Market Risk
Market risk in the forex market is capable of directly affecting the currency pairs involved in trading. One should have proper exposure to the market risk before trading in order to make profits by taking the advantage with there is a price difference, this can also be termed as ‘Market Volatility’. With Volatility traders are able to make trades with profit, but there is high risk of market goes against you.
2. Leverage Risk
you can see to it as the biggest advantage or the biggest risk of Forex trading. Investors like you and I use leverage on the investments to increase their returns. But also in opposite way leverage increases the losses as well.
3. Counterparty Risk
The Counterparty is the body along which you perform opening and closing of trading positions in the Forex Market. The risk here is that the counterparty goes bankrupt and does not pay you are maybe you are not paid because of the poor regulatory implementation.
4. Liquidity Risk
There are many traders / investors in the liquid market. There is time of low liquidity in the forex market during weekends and a bank holiday which may result in loses.
5. Online Transactions
The investors are supposed to invest in the Forex Market through Forex Credit Card Processing which can also be risky due to the involvement of variety of currencies. There are chances of fraud occurring during online transactions.
These are some of the risks involved in Forex Business, which has resulted in categorizing the Forex Business as a High Risk Business.
