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Presentation Transcript

Facts About Forex:

Facts About Forex Facts About Forex ( Courtesy of ) 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.).

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Facts About Forex ( Courtesy of ) 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

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Facts About Forex ( Courtesy of ) 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

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Facts About Forex ( Courtesy of ) 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

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