What are the risks of investing in forex?

Any investment involves risk and the forex market is no different, so before you start investing you have to know what the risks inherent in the currency market are.

In addition to the normal risks that any investor knows that he must take, such as the total or partial loss of their capital, the foreign exchange market has a number of characteristics that differentiate it from other markets and we have to know before starting risk our money. These are some of the features inherent in the forex market to be taken into account:


The high volatility

Among the currency pairs that the broker will allow us to operate there even better to start trading currency with less volatility and more volatile pairs whose behavior is more aggressive. It should be clear what are the characteristics of torque before operating to avoid unnecessary risks.

It is an unregulated market

Forex is characterized as a global market but with a local regulation as regulatory agents have national jurisdiction. Therefore our choice of broker is critical because if we have a problem we will be protected by the legislation of the country where the broker has decided to settle.

Underestimate the difficulty of the market
The currency market is one of the most competitive and where they operate banks, hedge funds and investment institutions, and therefore, we must take into account the need to have a training and a thorough knowledge of the market before you start invest.

Misuse of leverage

The ability to leverage is one of the features that most forex brokers will allow you, but before using it you have to know exactly how it works, and that its misuse can cause a significant deterioration in your wallet.

Risks associated with the broker

Before choosing a broker we have to know what type it is, if it is an ECN or Market Makers, .., etc, because everyone has different qualities and we have to know which is more compatible with the way we operate.

Also keep in mind under what legislation / regulation is the broker because if we need to make a claim we will be under the legislation.

what kind of platform or software is going to offer the broker to perform operations must be taken into account, as there are platforms with proven reliability as metatrader or JForex we will offer an extra guarantee in the execution of our orders.

Be aware of potential fraud

The portfolio manager is as valid as others when it comes to deciding how to conduct our investment choice, but bear in mind that there are managers that offer returns that are not real (eg 70% monthly profit) or are achieved with a discussion of our capital at high market.

Before taking any decision on what system we choose we must be very clear about the risks, expected volatility, under what law is the manager, ... etc.

These are some points to consider before deciding if the forex market is right for our investments because they do not know in detail the characteristics and risks surrounding the forex market can be lethal to our own results.