Risk with Forex

Hi All, I hear people warn me to stay away from forex because the leverage leads to risk of huge losses but I can not understand that. Perhaps someone can explain. If I use stop losses and do not hold trades over weekends, and only trade in major currencys surely I am not risking more than is in my account. I appreciate there may be some slippage in the stop loss but it should not be catastrophic.

Should it?

Thanks

Max

IMO, good money management and stop losses reduce the risk. There's always a risk of a big gap taking you beyond your stop tho, but I think avoiding weekends would help with that as long as you're using a decent broker.

Keep in mind tho that pairs are correlated. If you're long in a few xxx/usd pairs and the USD suddenly gets stronger on a news release you might be looking at a correlated loss that could take you beyond your stated MM %. Reducing your number of trades or using hedged trades can help with that.

Just don't risk more than 2% of your account on any trade or 10% of your account in the market at any one time.

Thanks for that. I had heard the 2 % rule before but not the 10%. That sounds very sensible. I still don't really see any reason why the broker would need to take more money than you had in your account though.
Thanks
Max

you'll get a margin call before your account hits 0 so you only risk whats in your account

And you can trade with low leverage as well. I don't see the need for anything above 20:1, which is already very, very high.

Regards - Xaron

Lose is inevitable in this market. But you right if you use stop losses you can protect your self to some extent. More than that you need to not over leverage your account. Only leverage no more than 2% of your account. This can take a lot of discipline. Don't get Big trade fever!