Sometime back when stock trading was considered as risk that it was equated with gambling. The main reason why it does not carry that stigma any longer is because of the evolution of risk management techniques in stock trading. Still stock trading involves numerous risks if the investor is not careful. Stock trading remains imbued with several risks all the time.
The most visible which is talked about and common risk in stock trading comes from the volatility of stock market. Stock market pundits are taken off guards when volatility strikes like an unexpected tsunami and sweeps away all the precautions and predictions in no time.
The first and foremost risk is inherent in the stock market itself. Market corrections and bear markets cause havoc to numerous investors who throw in the towel and lock in their losses. When the market correction takes place, it takes a toll of 10% to 20% of the market value of the stocks.
Risks when associated with interest rates confront the investors at all the time especially when the prices fall due to the increase in interest rates. If the interest rates rises people tend to sell off their equities and invest in fixed income securities such as high yielding bonds and other money market funds When there is a wide spread sale of shares, the value of the stocks falls. At this time this causes loss to the investors especially who have bought the stocks at higher rates.
The third risk emerges from the value of currency. When the currency grows stronger people experience loss on their foreign securities. When the rates of the local currency fall, the investors get more bonuses in terms of increased returns on their investments. When there is a constant fluctuation in the currency rates, it affects the investors who hold the funds for shorter terms.
How to trade forex : Any investor, who does not diversify his investments and especially when he invests all his money in equities, and then it is likely to bear the brunt when the market falls. Short-term investors who take loans to invest in equities suffer most.
Most of the stock market investors cannot able to manage successfully of their investment portfolios since they lack the expertise of investment specialists. They cannot anticipate the market trends and suffer losses. Some risks are related to certain sectors of investments. People who plan to invest in narrowly focused sector portfolios such as health care etc are exposed to losses. Changes in tax laws will reduce the value of your holdings.
For more details about Online currency trading
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