August 13, 2025
A collective sigh of relief swept over Wall Street yesterday following the latest CPI reading. While core inflation increased to 3.1% in July, beating both expectations and the June figure, headline inflation remained at 2.7%, below economists’ predictions. The publication was reason enough to drive US stocks higher, pushing the S&P 500 and Nasdaq Composite indices to new record highs by Tuesday evening. With the latest inflation data out of the way, markets now have a relatively clear view of the US economy. Inflation levels, while not ideal, remain manageable. The labour market on the other hand appears to be struggling. By most accounts, this is a straightforward setup to lower interest rates on the Dollar in September and judging by overall sentiment, market participants seem to agree. The optimism has even spread as far as Japan, where the Nikkei 225 closed at record highs yesterday. The index continued to push higher still this morning, breaking above 43,000 points for the first time in its history. The economic calendar will provide another insight into US inflation on Thursday, this time in the form of the Producer Price Index, which is predicted to rise to 0.2% in July.
Bitcoin remains near all-time highs of $120,000 but attentions are currently turned towards the broader altcoin market. Ethereum is currently toying with a record high of its own after a 9% surge yesterday pushed the token price above $4,600. The project rose to similar highs back in 2021 when prices topped out around $4,800 but the ensuing bear market destroyed such valuations for years to come. The increasingly loud question being floated around is whether “alt season” is finally back in play. Bitcoin dominance fell below 60% recently but has a long way further to fall before such claims can be substantiated. Shares in Robinhood (HOOD) closed at a record high last Friday, while paradoxically Coinbase (COIN) remains around 25% down from its peak in July.
US stocks ended on a high note last week after a huge rally in Apple (AAPL) pushed the Nasdaq Composite index to a new record high. Shares in Apple rose over 13% last week following bullish projections from Wells Fargo as well as an announcement from the company that it is increasing its investments in the United States by an extra $100 billion over the next four years. Despite the worrying jobs figures published the week prior, all three major US indices finished the week in the green, with the Nasdaq Composite and S&P 500 gaining 3.9% and 2.4% respectively, while the Dow Jones rose by a more modest 1.3%. In Japan meanwhile, the Nikkei 225 is also pushing for a record high of its own after an early morning surge pushed the index back over 42,000 points.
The rise in traditional markets was certainly nothing to be sniffed at, but it paled in comparison to the movements in cryptocurrencies. Bitcoin ended the week on good footing yesterday and carried over the momentum into this morning’s session. BTC is now hovering around $121k but the greater story lies in the altcoin market. Bitcoin dominance has taken an absolute beating recently and the gains seen up and down the leader board certainly reflect that. Even Ethereum has finally stepped up to the plate, convincingly breaching $4k and pushing into valuations not seen since the tail end of 2021.
There is only really one item worth discussing on the economic calendar this week: US inflation. The PCE price index published two weeks ago suggested there had been an uptick in inflation in recent months, which may or may not be confirmed by Tuesday’s CPI report. Forecasts suggest a slight increase in core inflation to 3% year-over-year, while the headline figure is expected to hit 2.8%. Inflation is certainly one side of the equation, but the dire jobs numbers revealed by the most recent NFP report are a much bigger problem for the Federal Reserve. Stephan Miran is set to replace outgoing board member Adriana Kugler and should he be approved by the time of the next meeting in September, the Fed is facing the prospect of three dissenting members if Jerome Powell continues to hold rates steady. A lot can happen between now and the next decision on the 17th of September, but so far markets are pricing in a 25-bps cut with 90% confidence.
Financial markets are notoriously volatile and can sometimes move in ways that do not always make sense. A given trading pair may suddenly swing in a different direction, seemingly out of nowhere, immediately wiping out an ill-defended position. Such a harsh environment can quickly overwhelm new traders, which is why it is crucial to protect open trades as much as possible. An effective risk management strategy can easily save a given trade. In fact, it can save an entire portfolio.
Before going any further, it is worth exploring what kind of risks FOREX traders are likely to face. The main types of risk are detailed below, along with examples:
A fundamental aspect of FOREX trading, market risk is simply the risk of adverse market movements. As mentioned above, sometimes markets can move against traders in unexpected ways. Sudden news events, economic data, central bank decisions and many other factors can cause sudden market movements. This type of risk is inherent to FOREX trading and cannot be avoided entirely.
Example: The Bank of England unexpectedly cuts interest rates on the Pound Sterling. This will typically cause a sudden drop in the Pound because such a move was not previously priced in.
Caused by the delay between when a trade is placed and when the trade is actually settled. FOREX trading is not instant. A trader has to submit an order, which is then broadcast to a wider network of traders before being handled by a matching engine, which has to find a corresponding order. These operations take time. It is possible that the market can move in the opposite direction before the entire chain of operations has a chance to complete.
Example: A trader takes a long position on EUR/USD, expecting the Euro to strengthen. Unfortunately, the Euro instead weakens before the position has a chance to fill, resulting in a loss instead of a profit.
Caused by a lack of liquidity in a given currency pair. This is typically not a problem for major pairs including the Dollar or the Euro, but it can be a problem in more exotic currency markets. A trader switching in and out of the Turkish Lira or the Malaysian Ringgit may find there are very few people on the other side of the trade and may struggle to fill the desired order as a result. This can lead to the trader getting a very unsatisfactory price, potentially affecting overall profit.
Example: A trader wants to buy Mexican Pesos with Euros. The order is only partially filled at the desired price point because the books lack sufficient depth. The rest of the order is filled at a higher price, leading to fewer Pesos acquired.
Caused by too high leverage. Traders use leverage as a tool to multiply market movements. This is very useful when markets are calm but can be lethal during times of high volatility. A sharp movement in the wrong direction can result in an almost instant loss if the leverage is too high.
Example: A trader goes long on USDJPY at 500 leverage but the Japanese Yen makes a sudden move higher. The position runs out of margin before the trader can react.
Caused by the FOREX broker. A good trader may still lose out if the other party in a transaction fails to fulfil their side of the trade. Brokers following less stringent regulations or lacking proper liquidity may not be able to fill their traders’ orders, or in extreme cases may go bankrupt or even vanish off the face of the Earth.
Example: An unregistered broker goes bankrupt, offering no protection to their clients, resulting in a permanent loss of funds for all traders involved.
There are many good practices that traders can employ for better risk management, as follows:
The cornerstone of FOREX trading. A stop loss will automatically close a trade if the currency pair does not move in the desired direction. This simple tool can cut short a bad trade, resulting in a very minor loss and allowing the trader to try again at another time. Stop-losses are generally seen as good practice no matter the situation and should be used liberally. The exact positioning of the stop-loss does require a level of understanding and finesse, which new traders will acquire as they gain more trading experience.
Traders should only risk a small percentage of their capital with each trade, ideally no more than 5% at the absolute maximum. The most important part of trading is the strategy. The overall strategy may yield positive results over time, while still producing occasional bad trades. This is why traders need some degree of flexibility. Traders should be able to afford losses, while achieving success in the long run. Traders using their entire balance have no such flexibility.
Trading has a steep learning curve that can be ruinous to new traders. Using low leverage is an excellent way to make things easier for traders who are learning the ropes. Beginners may also try out a demo account in order to understand trading without risking real capital. As traders become more confident and more familiar with financial markets, leverage can then become a great tool to enhance their trading performance.
As mentioned previously, exotic pairs can often lack sufficient liquidity. Unless traders have specific knowledge on one of the lesser traded currencies, such pairs are better left alone. Moreover, because commonly traded pairs have better liquidity, not only are orders easier to fill, they are also typically cheaper to trade compared to their more esoteric counterparts.
Major economic events can have an enormous impact on financial markets. Unexpected central bank decisions, economic data, labour market reports can all send shockwaves throughout the foreign exchange markets, causing extreme price action across currency pairs. Traders need to be aware of such economic events in order to avoid getting caught out by the resulting fallout. The economic calendar is crucial to success in this regard, as is staying on top of financial news in general. Trading during times of high volatility is simply more dangerous, which is why many traders simply opt to close their positions before any major economic data release such as Non-Farm Payrolls.
FOREX markets can present a challenge to new and experienced traders alike. Understanding the risks involved is important; implementing the strategies necessary to mitigating such risks is crucial. Foreign exchange markets are by their very nature unpredictable and sudden price fluctuations can catch beginners off guard. The good practices described above will ensure new traders ease into the FOREX industry on sure footing and help orient beginners towards lasting success.
Forex risk, or FX risk, is the potential for financial loss due to unexpected currency exchange rate movements in FOREX trading. Beginners should pay attention to this risk because these fluctuations could lead to significant losses. Implementing stop-loss orders and maintaining low leverage are effective ways to protect your investment.
Major pairs like EUR/USD or USD/JPY offer high liquidity and tighter spreads, reducing costs and avoiding extreme price swings compared to exotic pairs like USD/TRY. Trading on more liquid pairs also increases the likelihood of filling orders at the desired price point, whereas less liquid pairs may offer sub-optimal pricing.
Beginners should focus on high-impact indicators like interest rate decisions, non-farm payrolls, GDP reports, and inflation data. These announcements can cause significant volatility. Use an economic calendar to identify upcoming events, avoid trading during major releases until you gain experience, and understand how different currencies typically react to specific data drops.
Use a demo account to test risk management strategies without financial consequences. Practice setting appropriate stop-loss orders, experiment with position sizing (limiting each trade to 1-2% of your account), and learn to diversify across different currency pairs. Track your results meticulously to identify which approach works best for your trading style before transitioning to live trading.
No. FOREX trading is unpredictable by its very nature. It is impossible to completely eliminate risk because financial movements are downstream from human emotion and behaviour. The best a trader can do is to use tools and strategies that protect their trades when things do not go to plan.
Leverage is essentially a multiplier. It takes small market movements and turns them into larger ones. A trade at 100 leverage is not the same as a trade at 500 leverage. Potential profits increase with leverage, but so too do potential losses. Margin requirements increase with leverage. Risk increases with leverage, as such it is a tool to be used cautiously.
The latest tariff deadline is set to come into force tomorrow. Countries around the world are scrambling for last-minute trade deals, or in China’s case, a deal to delay the incoming tariffs. The president of Switzerland announced that she would fly to Washington D.C. in an attempt to avert 39% tariffs on Swiss goods. India meanwhile is facing renewed pressure after president Trump threatened to increase tariffs beyond the previously agreed 25% figure. Tensions between the two nations have flared up in recent days because of the secondary sanctions imposed on Russia, which burden Russia’s trading partners with additional tariffs. This is particularly tricky for India, which now sources roughly 40% of all its crude imports from Russia. As the deadline approaches by the hour, it becomes increasingly unlikely that any more significant deals will emerge.
Last Friday’s NFP-inspired selloff did not last and by Monday evening US stocks had largely recovered. The Dollar meanwhile has been remarkably boring with major pairs barely moving all week. Gold has been similarly muted, content to hover around $3,380 per ounce since Monday. Unsure on their next course of action, many markets have collectively decided to do nothing at all. Bond markets on the other hand are seeing more activity this week as traders anticipate a pivot in monetary policy. The latest NFP drop has all but convinced markets that a rate cut is coming in September and many traders are repositioning accordingly.
The latest Non-Farm Payrolls put a serious dent into investor sentiment last Friday. The July figures were bad enough, coming in at just 73k new jobs against expectations of 110k, but revisions on previous months delivered the real death blow. In a shocking correction, June numbers were revised from 147k down to 14k, while May was slashed from 139k to 19k, culminating in a massive revision of quarter of a million fewer jobs. The first question on the minds of many is how did the Bureau of Labour Statistics get the numbers so wrong? The second question is what these numbers mean for the US economy. The commissioner of the BLS has already been fired by president Trump, but the second question remains unanswered. US stocks took the news badly, resulting in a 1.2% loss for the Dow Jones on Friday, while the S&P 500 and Nasdaq Composite fell 1.6% and 2.2% respectively. Stock markets around the world soon followed suit, while Asian markets had to wait for this morning’s open to react. The Dollar erased all gains from earlier in the week while gold took the opportunity to climb 2.2% to $3,362 per ounce.
As expected, the Federal Reserve elected to maintain interest rates on the Dollar at 4.5% during last week’s meeting. In a not-so-expected move, two out of the eleven board members dissented, voting instead for an immediate rate cut. While the dissent has no impact on the overall decision, it is the first time since 1993 that two governors voted against the majority. The decision to maintain high rates has been repeatedly criticised by the Trump administration, but up until now the Fed had always been able to back up their position by pointing to a strong labour market. With the latest NFP report, that position instantly became untenable. FedWatch is now heavily in favour of a rate cut on the 17th of September, with interest rate traders now betting on a 25-bps cut with 80% confidence.
The economic calendar is a veritable ghost town compared to last week’s actioned-packed schedule. With the exception of a rate decision from the Bank of England on Thursday, service PMIs are the only noteworthy events of the week. Earnings are also unlikely to spark much interest. The latest NFP data has challenged a number of narratives and markets will have to wait for the dust to settle before regrouping.
One of the first steps a new trader will have to take on their trading journey is deciding which FOREX broker to use. The decision is not one to be taken lightly and there are a number of considerations to keep in mind.
The FOREX market is a global network that brings together traders, financial firms, banks and liquidity providers from around the world. The role of a FOREX broker is to connect traders to this global network, acting as the middleman between every participant. While the extremely wealthy have access to their own private trading desks, regular traders need to employ the services of a brokerage firm to buy and sell.
There are hundreds, if not thousands of brokers currently in operation. Choosing the right one can be a daunting process, so here are a few key points to keep in mind.
While not the most glamorous aspect of FOREX trading, regulation is nonetheless crucial. FOREX brokers are often registered with Offshore Financial Centres, which are typically small island nations such as the Seychelles, Mauritius or the Cayman Islands. Brokers can also be licensed by much larger authorities, such as the Financial Conduct Authority (FCA) in the UK, or the Australian Securities and Investment Commission (ASIC). Some brokers fall under the jurisdiction of multiple different authorities.
Licensed FOREX brokers are subject to financial and legal obligations that unlicensed brokers are not. The licensing authority dictates exactly what a broker can and cannot do. In order to receive regulatory approval, brokerage firms must comply with a number of requirements, including Know Your Customer (KYC) rules, Anti-Money Laundering (AML) rules, as well as financial conduct and transparency standards. It is vital to understand that not all jurisdictions are equal. Some financial authorities are more stringent than others and therefore offer greater customer protection, which is why it is important to research where the potential broker is registered and what such a registration entails.
The more reputable authorities, such as the FCA and ASIC, take things a step further by requiring FOREX brokers to keep their clients’ funds in segregated accounts, protecting them in the event of fraud, insolvency or other unforeseen events. Such a requirement has in fact become standard across the industry and most brokers, whether falling under the above jurisdictions or not, have adopted the same practice. This should be checked on a case-by-case basis.
On the broker side, it is in their interest to acquire a more reputable licence because it gives them access to more markets, allows them to use major payment processors such as Visa or Mastercard, offers more secure banking relationships and grants them a greater air of legitimacy.
An easy way to check a FOREX broker’s lawfulness is to navigate to their main page, scroll all the way down and read the small print at the bottom. This is where brokers will typically give their licence number, which can be looked up on the website of the relevant authority. By doing this, traders can check whether or not a broker is indeed legitimately registered, and with whom.
Try it for yourself!
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