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By Jim Nettleton

In these days of the ever-present Internet, there is almost nothing that we can’t do online. Making and managing your investments is no exception. Online investing offers many benefits as compared to traditional methods. For one thing, decisions can be made instantly and transactions are swift, allowing the investor to take advantage of rapidly changing conditions.

Another advantage of online investing is the commissions on trades are frequently much smaller. If you’re an active trader, that can add up to substantial savings in any given month. With an online account, you can study your portfolio at any time, instantly, twenty-four hours a day from anywhere in the world that has Internet access.

There is, of course, a downside to all this convenience and instant trade orders. You need to exercise discipline because online investing does make it extremely easy to plunge into a bunch of trades pretty much all at once. Depending on your risk tolerance, this can be a very dicey proposition.

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Just like most other forms of trading, foreign currency trading has risks and the novice foreign currency trader needs to be acquainted with these before starting to trade. Here we will consider the 5 most common risks of Forex trading.

1. Forex scams. In the past few years the industry has done a great deal to put its house in order and today Forex scams are unquestionably far less common than they used to be. Nevertheless,they do still exist.

It is quite easy to open a Forex trading account, especially online, and a Forex scam is simply a case of a crook operating a website pretending to be a broker, inviting you to create an account and deposit money into it and then disappearing without a trace.

To make sure that you do not get caught out you should check out any broker carefully before opening an account. Choose a broker who has an association with a major financial institution (for instance, an insurance company or bank) and who is additionally registered as a broker. In the United States brokers are either registered with the Commodities Futures Trading Commission (CFTC) or are a member of the National Futures Association (NFA).

2. Exchange Rates. One of the draws of the Forex market is the fact that it can be tremendously volatile with currencies moving a lot against one another in very short periods of time giving rise to fast and considerable gains. However, the other side of the coin is that the volatility in the market can also produce sizeable and rapid losses.

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