Risks ( Leverage )

Although Forex trading can lead to very profitable results, there aresubstantial risks involved: exchange rate risks, interest rate risks, credit risksand event risks.Approximately 80% of all currency transactions last a period of seven days orless, with more than 40% lasting fewer than two days. Given the extremely short lifespan of the typical trade, technical indicators heavily influenceentry, exit and order placement decisions.

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A spot transaction ( Leverage )

A spot transaction is a straightforward exchange of one currency for another.The spot rate is the current market price, which is also called the “benchmarkprice”. Spot transactions do not require immediate settlement, or payment“on the spot”. The settlement date, or “value date” is the second businessday after the “deal date” (or “trade date”) on which the transaction is agreedby the trader and market maker. The two-day period provides time to confirmthe agreement and to arrange the clearing and necessary debiting andcrediting of bank accounts in various international locations.

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tell me about " Leveraged financing " in forex

Leveraged financing is a common practice in Forex trading, and allows tradersto use credit, such as a trade purchased on margin, to maximize returns.Collateral for the loan/leverage in the margined account is provided by theinitial deposit. This can create the opportunity to control USD 100,000 for aslittle as USD 1,000.There are five ways private investors can trade in Forex, directly orindirectly:

• The spot market
• Forwards and futures
• Options
• Contracts for difference
• Spread betting

Please note that this book focuses on the most common way of trading in theForex market, “Day-Trading” (related to “Spot”). Please refer to the glossaryfor explanations of each of the five ways investors can trade in Forex

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