Margin trading is not familiar to traders who have never traded in the forex market. Margin trading is most risky when a counterparty fails to make a payment on an open position. Margin traders are not able to quantify the risk associated with margin trading on their own, but rely on regulatory recommendations. However, traders can minimize the risk associated with margin trading by using regulated brokers. Brokers are regulated by reputable regulatory bodies such as the Financial Conduct Authority of the U.K., the Securities and Exchange Commission of the U.S., and the Australian Securities and Investments Commission.

With currency trading, there are several types of risks. The stock market uses fundamentals to predict future prices, but the forex market has much more complex risks. An investor's investment can be influenced by a variety of uncontrollable factors, including the economic and political conditions of a country. A natural disaster or political crisis can also affect the value of a country's currency. Currency trading is therefore very risky.

While experts in foreign exchange trading can reap huge profits from arbitrage, first-time investors should be wary of the risks involved. Even seasoned investors can suffer large losses, especially if they are not familiar with the market. To minimize risk, it is best to follow news and obtain mentors. As with any other investment, forex trading involves speculation and guessing whether a currency will move in a certain direction.