Facts About Forex
When talking about markets that are highly volatile and highly instable, the first market that usually
comes to mind, at least in the minds of most, is the Forex market. Surely, when trading with currencies
you are bound to find yourself in the middle of a highly volatile market (considering that a currency’s
value is affected by a great many factors, including, though not limited to, natural disasters, political
developments, etc.).
Facts About Forex ( Courtesy of HenryLiuForex.com )
Facts About Forex
It is no secret that the volatility and instability of the Forex market is what allows a Forex trader to make a
profit, but this also makes for a much more risky market. As you surely know, increased risks can quickly turn
into increased losses. When engaging in currency trading, a Forex trader will try to mitigate risks, and for the
most part, a knowledgeable and skilled trader will succeed in diminishing risk. However, there may be times
that no matter what a Forex trader does; he or she will end up having to put up with losses. Sometimes this is a
consequence of mistakes made when making decisions, but other times this is a matter of just chance (and bad
luck at that).
Facts About Forex ( Courtesy of HenryLiuForex.com )
Facts About Forex
Given that orders are seldom completed instantly,
there is a time window (between the time when you
send the order and the time when it is completed)
during which the currency’s value can unexpectedly
change; these unexpected changes can generate
profits, but they can also generate losses for a Forex
trader. For example, imagine that you have placed a
stop-loss order in order to mitigate losses in a currency
trade.
Now, it comes the time when the currency you are
trading starts to plummet; the currency reaches the
stop-loss level and the system automatically issues an
order to stop and exit the trade. However, during the
few seconds that the order takes to be processed, the
currency’s value continues to plummet; by the time the
order is finally processed your losses have increased
because of these few seconds. This problem that
occurs given the impossibility of orders to be processed
immediately is slippage, and it should be clear by now
that it can be potentially devastating for a Forex trader.
Yes, it is true that slippage can also work out to a Forex
trader’s advantage, but for the most part it is a
problem that has negative effects.
Facts About Forex ( Courtesy of HenryLiuForex.com )
Facts About Forex
In the Forex market slippage is always a
risk that traders have to put up with,
especially at times when the market is
highly volatile or unstable. As well, it is
important that you know that a Forex
broker will always try and use slippage to
his or her own advantage, even if this
means generating losses for you.
Remember, you are trading in a Forex
broker’s platform system, so they may
very well work the market’s volatility to
their advantage and use slippage as a
means of making profits at your expense.
Despite of this, traders usually accept the
occurrence of slippage, and for the most
part, they are willing to risk it.
Notwithstanding the risk of slippage, the
potential profits are too great to be
ignored, and so traders are willing to
continue on trading, even at times when
volatility runs high.
Facts About Forex ( Courtesy of HenryLiuForex.com )