Is there a loss protection in FX trading?

In this case, the answer can only be a clear no. Forex trades are settled through trader accounts. These are considered foreign currency accounts in Germany and are exempt from deposit protection. The same applies to brokers. These do not offer loss protection because of the uncertainty of many trades. The costs for a possible refund would be higher than the return to be expected by the trader, so that a loss protection for a broker would mean an absolute minus business.

Each trader trades at his own risk

In various exceptional cases, however, a replacement of lost money can be claimed. However, these measures only take effect if the broker is proven to have culpably failed. Such a case could be, for example, the failure of the platform during an ongoing trade. However, there are usually corresponding clauses in the GTC that exclude precisely such a claim for compensation.

Incorrect data in case of technical defect

Another case, in which under certain circumstances the capital must be replaced, occurs when the broker provides incorrect data. This may also be due to a technical defect. In this case, since the trader cannot know if the data is correct, compensation from a broker may be possible. However, in this case, the broker must also be proven to be at fault. A general claim for compensation in all these cases, however, does not exist.

How does Forex trading work exactly?

If an investor believes that the U.S. dollar will remain stable while the euro is expected to have an increase in value, then the investor exchanges the dollar for the euro. If there is then a rise in the exchange rate and the euro increases in value, the investor can exchange the euro back into dollars, but get more American dollars in withdrawal than the amount he paid up front for the euro. The forex market is the world’s largest single financial market that is twice the size of all other stock and futures exchanges combined. The forex market leaves the New York Stock Exchange in the shade, with a daily turnover of about $5 trillion traded in currencies.

Compared to the $50 billion turnover on Wall Street, this sum shows the gigantic scale and importance of Forex in the global economy. Large banks, corporations, national governments, small investors and private traders exchange currencies in the hope of making a profit based on the fluctuations in exchange rates.

The forex market has no central location, small trades are executed by brokerage houses and brokerage firms, and all currencies are exchanged exclusively by banks. Although forex trading is carried out globally but almost thirty percent of forex trading takes place in London, while about seventeen percent is carried out in New York and six percent in Tokyo. Since Forex trading is global in nature, foreign exchange can be traded 24 hours a day, six days a week.