3 Things You Must Know about “Risks” before start trading FX, Stocks or Commodities

April 11, 2017

"Risk" is one very important thing you must know.

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3 Things You Must Know about “Risks” before start trading FX, Stocks or Commodities

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Any kinds of “Investment” involves certain risks.

You may consider the potential future profits first though, you must know the “Risk” involved to achieve that goal.

But what kind of “Risks” are there & how they are involved?

Firstly, there are 3 things you must know before start trading! These are 3 very common rules for every FX broker.

Cost

The cost of investment is different by each broker, and there are several types of costs involved such as:

Spread (the difference between bid and ask price) – $0 – $50 per $100,000 worth of transaction.
Swap Charges (Overnight Interest) – Larger the trading volume, larger the Swap charge could be.
Trading Commissions – $0 – $20 per $100,000 worth of transaction.

Before making any transactions, it is important to know what cost will be involved to complete that operation.

Leverage

Leverage can be 1:1 – 1:5000 depending on your broker.

In case, you apply the leverage 1:5000, then you can trade 5000 times more than the fund you actually have.

This will increase your amount of profit but also loss at the same time.

You can consider that, higher the leverage is, higher the risk is.

NBP

NBP stands for Negative Balance Protection.

It mainly protects traders from exceeded losses.

As in, the maximum loss will be limited to the total deposit amount. If the loss exceeds the total deposit amount and negative balance occurs in your account, your FX broker fixes the balance to 0.

There is a few brokers which don’t support NBP, so you may contact your FX broker to find out whether the condition is available or not before start trading.

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