How to Trade High Risk Investments
What is life without a little risk? We would never take risks without the thrilling possibility of reward. High-risk investment carries the potential for both greater profits and great loss of money.
Here we explain what high-risk investments are, highlight the risk-to-reward ratio, how to trade high-risk investments and the rewarding effects of compounding when you trade with us at AIFX
What is a High-Risk Investment?
Due to an asset’s volatility, and in comparison to conventional investments, high-risk investments have a greater chance of profit paired with an equally increased risk of loss. While all trading involves risk, some investments carry greater risk than others so it’s advised that you understand the risks associated with your trading time and that you’re comfortable with your risk exposure.
Read more if you still have questions about whether you should start trading Forex.
High-Risk, High-Return
A high-risk, high-return is often referred to as the risk-return trade-off, and is based on the theory that the investment’s potential return is greater when there is an attached greater risk for that certain investment.
Risk-to-Reward Ratio
This ratio is used by traders to gauge the expected returns against the amount of risk to which they will be exposed during the trade or investment. Traders can therefore use this risk-to-reward ratio to determine their potential losses alongside the possible profits.
A ratio over 1.0 means a greater risk than expected return and a ratio below 1.0 means that the expected profit is greater than the potential risk.
How to Trade a High Risk Investment
At AIFX Learning we suggest you trade high risk investments in the following way:
- Put in the minimum requirement of 1000 GBP/EUR/USD for our high risk investment service The Syntax. This minimum requirement of funds is placed at your own risk. With The Syntax investment service, you usually get high returns and you should double your money within a few months.
- Once this happens, we recommend you withdraw your initial capital amount. By withdrawing your initial capital, you are now trading with additional money you’ve earned. In this way, you can call this ‘risk-free’ trading.
- Now it’s time for you to discover and enjoy the effects of compounding. Once you’ve reached a level where you feel comfortable with your monthly returns, you can begin to withdraw small amounts of monthly profits. Thereafter you can either put them in another lower risk investment or spend them. By doing this, we believe you can get the best of both worlds!
- Even better, take advantage of the power of compounding interest. Compounding is the process in which an asset’s earnings (from capital gains or interest) are reinvested to generate additional earnings over time. Compounding is crediting interest to an existing principal amount (and interest already paid).
Now that we’ve let you in on the secret of compounding, allow us to demonstrate the effects on your capital if you traded with one of our Investment Services. Read more about Compounding Calculators.