1) High leverage risk: Due to the leverage ratio used in foreign exchange margin trading, the loss amount is magnified, especially in the case of using high leverage, even a small change contrary to the position will bring huge losses.
2) Market risk: The foreign exchange market operates 24 hours a day with unlimited trend. When it fluctuates violently, you can understand the difference from the sky to the ground in one day. Because there are many factors that affect the trend of foreign exchange, no one can accurately judge the trend of foreign exchange rate, so there are market risks in foreign exchange transactions.
3) Risk of online trading: Foreign exchange margin trading is mainly conducted through the Internet. Due to the characteristics of the Internet itself, there will be a phenomenon that foreign exchange dealers cannot access the system, which may lead to huge losses, and foreign exchange dealers will not be responsible for this.
Foreign exchange margin trading is characterized by small funds and large profits. It is precisely because of this feature that investors often ignore risks while pursuing profits too enthusiastically. Remind foreign exchange investors that the foreign exchange market is risky and investment needs to be cautious.
2. Foreign exchange translation risk: also known as accounting risk, refers to the risk that different items in statements are translated at different exchange rates (current exchange rate, historical exchange rate and average exchange rate) due to exchange rate changes, resulting in losses or gains. The so-called conversion means that the foreign currency accounting statements of overseas subsidiaries are converted according to a certain method and a certain exchange rate, and expressed in the currency of the country where the parent company is located, so as to prepare the consolidated accounting statements of the whole company. Translation risk refers to the risk of loss or gain caused by exchange rate changes. Different items in the report are translated at different exchange rates (current exchange rate, historical exchange rate and average exchange rate).
3. Economic risk: Economic risk refers to the impact of unexpected exchange rate changes on the present value of future cash flows of multinational companies expressed in domestic currency. It is used to measure the potential impact of exchange rate changes on the profitability and company value of the whole enterprise. According to its causes, economic risks can be divided into:
(1) Natural risks: refer to risks caused by natural factors, such as floods, fires, earthquakes and epidemics. For example, SARS virus appeared in the spring of 2003, and novel coronavirus swept the world in 2020, which brought certain influence and loss to our production and life;
(2) Social risk: refers to the risks caused by the actions of individuals or groups in society, such as theft, war, political turmoil, etc.
(3) Operational risk: refers to the risk caused by factors such as poor management or market supply and demand in the process of commodity production or sales.