What are the main risks in Forex trading?

Below are the major risks involved in Forex trading:

Market Risk – Currency prices can move unpredictably, leading to quick losses.Leverage Risk – High leverage can amplify both gains and losses.Liquidity Risk – Low market activity can lead to wider spreads and slippage.Interest Rate Risk – Rate changes can impact currency values and overnight positions.Counterparty Risk – Poorly regulated brokers may pose withdrawal or trust issues.Event Risk – Political or economic news can cause sudden market moves.Emotional Risk – Fear and greed often lead to poor trading decisions.Technical Risk – Platform outages or tech issues can disrupt your trades.

Solid breakdown of the risks — I’d add that emotional risk is often the most underestimated. You can manage leverage, pick a regulated broker, and follow your strategy… but if you panic-sell or revenge trade, none of that matters. Mastering your mindset is just as critical as managing your margin.

I have learned the hard way that market moves can be quick and leverage can be dangerous if you’re not careful. I am trying to focus on trading major pairs to avoid liquidity problems and always keep an eye on news events. Managing emotions is still a challenge, but I’m working on it. 

The biggest risk is that you enter trades before you know what you are doing. That is what almost all new traders do. People need to take the time to learn how to trade on a demo first before risking real money

I quickly realized that managing risk is just as important as chasing profits. The market moves fast, and sudden price swings can wipe you out if you’re not careful. Leverage sounded exciting at first, but I learned it can amplify losses just as easily as gains. Now, I use it sparingly.

I stick to major currency pairs to avoid liquidity issues and always check the news to stay ahead of interest rate changes or unexpected events. 

But the toughest part? Emotions. Fear, greed, and revenge trading have cost me more than bad analysis ever did. Learning to stay calm and disciplined is an ongoing challenge, but it’s key.

You can’t avoid all risks in Forex, but you can manage them. For me, mindset has become just as critical as strategy. Still learning every day.

The main risk in Forex trading, is opening a trade with a live account in a live market without a fully proven trading strategy.

The main risk is risk management itself. People get huge leverage then bet 1 Lot on a trade and wipe out their account. It is sad to see this repeated over and over again. Traders need to be less greedy and understand that it will take time to be successful trader. Learn to trade, use a demo account, start with a small trading account and small Lot size. 

The main risk is not having a profitable strategy (backtested and proven) and not miscalculating your risk and adequate deposit.

Here is how the risk management works:

First of all you need to assess what maximal drawdown (in money! not in %) will make you emotionally comfortable, so that you don't start closing positions only because being scared. Obviously this decision will depend on your perception of yourself and all your capital. It's very personal. For example, someone who has only $100k of funds and has no any other capital might feel that his max comfortable DD is 2k, while for someone else this would be 5k or only $500.

For example, lest say that for you it's 1k.

Then you need to back test your strategy and see what volume you need to be trading so that the DD doesn't exceed 1k and what balance you should deposit so that you don't hit the margin stop.  

Then you need to see the maximum margin you will be using (deposit load). This will depend on your strategy and the leverage of your account.

Then you can make an adequate deposit.

For example if your broker's margin stop is 50% of the used margin and your deposit load will be 50% the balance, then you can deposit 2k and feel safe, because your max dd will be 1k (50%), and the margin stop will get activated only if you reach dd of 1.5k (75%). You can deposit even more, but if you know that you will start closing your trades yourself anyway, when they reach dd of 1.1k or 1.2k so... It's all personal. After all, your goal is to be in control and feel comfortable. Otherwise mistakes and losses are inevitable.

Also you should make sure that your account's leverage is fixed. I saw a swiss broker that changed it during nights or weekends. This can be a huge problem.  

***and miscalculating your risk and adequate deposit.