Hello, are you new for Forex Trading? Here some tips for
while trading & what are all the risks have in this foreign currency
exchange !
·
When one exchanges something for something else
one is concerned about two things: the value of what was given; the value of
what was received.
·
What is received should technically, be more
than what is paid. Any situation which poses the risk of losing more in receipt
relative to what is paid it could be safely said to be risky.
·
Let me explain: INR is what we receive when we
work in India. We have no FX risks; However, when our pay is paid in USD we are
posed to FX risks. How so? Here is how: 1 USD/ INR = 50 (1 dollar will get 50
rupees); when we receive 1 dollar we convert it to rupees and we are paid 50
rupees. If INR depreciates (I USD / INR =55 (1 dollar will now get 55 rupees) we
are happy and have no risk because this fluctuation has got us more rupees. But
the volatility does not drive prices only down in depreciation they might also
appreciate (I USD / INR = 45 (1 dollar get only 45 rupees). In that event we
will lose because our 1 dollar has fetched us only 45 rupees.
·
Therefore, the FX risks are when our incomes or
expenses have to paid out or received in foreign currencies.
When we cannot
predict or take a forward position correctly pricing the exchange rates while
paying or receiving we might end up paying more or receiving less sometimes.
That unknown factor is known in foreign currency terms as FX risks.
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