Drawback of Forex Exchange Trading
When the brokerage is involved it often leads to lack of transparency and less outcome of the investment.
Therefore, in Forex trading few brokerages involved in Forex trading. It’s better advised to go and look for a broker who follows all the rules and falls under the category of broker regulators.
The market may not always work under regulations, but it may work on the activities of the broker.
2. Price Determination Process
The process of price determination in foreign trade exchange is often considered to be difficult because of the complex price determination process.
The rates are determined, and they fluctuate by multiple reason and factors.
The global politics and economy influence majorly in the rate of the currency thus creates uncertainty of the price.
The trading is done on technical knowledge and indicators which indicate whether it’s going to be a loss or no.
3. Risk Factor
There is a risk factor involved in the Forex Trading market.
There is a high leverage which results in the higher risk involved. There is the uncertainty of the price and the rate of the currency which ultimately give the higher profit or huge loss so one has to be very focused and knowledgeable about foreign exchange market where future forecasting can be profitable and accurate.
4. High Volatility
The high Volatility characteristics of the Forex trading can either be a benefit or drawback.
The changes in global politics and economy drastically change the forecast and diagram about the Forex market, so it makes it difficult for the investors to take the risk and invest money.
It can cause a huge loss to the investors if the market goes down the hill and when a loss is incurred an enormous amount of money will go as a loss.
5. 24 /7 Market
The market never sleeps, and thus the same goes to the investors also.
The investors when they invest money they have to be updated with the market trend which gets updated every minute.
The market can go unpredictably at any hour so the investor has to be attentive and conscious about the fluctuation of the Forex market which can happen any minute of the day.
6. Social Trading
The free exchange of information on the internet is an advantage because an individual can easily look up to the market condition and do investment.
But using social trading one can follow the wrong inexperienced trader and result in adequate loss over time.
So it is preferred to look up for a trader who is experienced and can invest the money properly which can lead to heavy profit in future.
7. Over Confident
As time passes by for a person in the world of Forex trading, they experience a set of trades in which they win and fail to realize that they may lose the next trade.
The level of overconfidence occurs with an individual, and he fails to realize that he may not ever win.
The person may lose his discipline and takes other trade as similar to the other which leads to over confidence which can cause an obstacle in his progress.
To enter in the Forex trading market, one should have adequate knowledge about how the market works so that individual has to take some courses or classes to know the in and out of the foreign exchange market.
It is better if a person gets educated before entering the market or else that person has to bear heavy losses in future.
The disadvantage of Forex trading market is that there are a lot of scammers who are ready as cheats drooling to loot the money from the investor.
So the investor has to be very careful about to identifying a trust worthy, reliable person who won’t cheat and can give better returns.
Therefore, Forex trading market is filled with frauds and cheaters, but it depends on the investor to take a decision and go with the right person.
Forex trading, there is risk factor involved which creates fear among the traders.
It makes trading difficult for the Forex traders because the fear is inculcated in them because of the uncertain environment.
Therefore a trader has to be mentally strong and well trained to invest their money smartly.
The disadvantage can be overcome by selecting a brokerage that has perfect knowledge.