Risk Management

Once you have the facts it is decision time. You can choose to do nothing or seek to reduce the exposures or to hedge them in whole or in part. The unforgivable sins are to fail to consider the risks or fail to act on any decisions.

The risk culture of your business is critical and must be established at the most senior level. Above all it calls for honesty. Too often individuals are criticized for decisions that, at the time, were in tune with the organization’s perceived appetite for risk. But it is never easy to set down effective guidelines and the range of exposures for even a simple transaction can be extensive.

For example, an exporter needing to borrow to finance a sale in foreign currency may have to consider counterparty credit risk, funding risk and interest rate risk. The permutations are endless and the costs of hedging transactions to reduce or eliminate every possible exposure could potentially swallow any profit from a deal.

While losses are likely to be quantitative, the potentially infinite number of risk combinations means that the skills needed to make good decisions are usually qualitative. Even a computer programmed to consider every conceivable permutation of risks needs to be told what level of exposure is acceptable. Any program is only as good as the parameters and data fed into it by people who have themselves been conditioned by experience.

NO Spreads No Kidding

The information revolution has dramatically changed the way in which the financial industry conducts business. Transactions have become faster and inexpensive to conduct, more and more financial products have become available to the general public. Retail Forex is one of the investment products brought to life in the Internet age.

No matter how sophisticated technology could be, trust remains the foundation of the financial industry. Smaller commissions do not matter if the broker gives little respect to the customer, smaller spreads are irrelevant if execution is with "slippage." When I began working in the futures industry over 25 years ago, much of the business was conducted on a handshake basis. Today, when technology enables us to do business with people who we have never met in person, trust and good name becomes the most valued commodity.

There are many Forex brokers across the globe, some more trustworthy than others. Only a handful are regulated by respective governing organizations established to protect investors from bad broker practices (such as National Futures Association). Not all are committed to life-long relations with their customers, and even fewer make a genuine effort to educate their customers.

We at Forex Club understand what trading, and for that matter Forex trading, is about. Success in trading is to have the knowledge and understanding of available resources and instruments, as well as proper risk management. We mobilize our senior traders and analysts with decades of experience to provide you with superb training programs.

I sincerely wish that the information on our website will be of great educational value and enable you to have a better understanding of the markets and give you the insight to become a more successful trader.

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