For any investor who has most of his/her assets in traditional investment venues (e. g., stocks, bonds or real estate), investing some funds in forex may be appropriate. Forex is global and its pricing actions do not closely correlate to those of any other major investment class. It doesn’t stop every afternoon; you can trade at midnight, if you want to. In forex there are no prohibitions against selling short. In fact, the fees are the same for a buy or a sell order; and, generally speaking, those fees are lower than the cost of trading in either the stock or bond markets. Many forex trading accounts offer very high leveraging abilities. It’s not that uncommon to be given the right to trade at a ratio of 200:1, if you want to go that high. Lastly, in some countries, taxes on forex profits are minimal.
Many forex traders use moving averages to help them in spotting forex trading opportunities. If you’re going to do “day trading”, using exponential moving averages may be more profitable.
The Benefits Of Trading Forex
Within the realm of potential investment venues, forex is a bit unique. First of all, it’s very global, involving over 80 currency pairs that are being traded around the clock. Second, you can trade when you want. Forex trading sessions don’t end in the afternoon. They just roll on to the next time zone. There are also no limitations on short selling and the relative cost of executing trades is very reasonable. Lastly, most accounts come with high leverage ratios. It’s common to be granted 100:1 financing and 200:1 isn’t that uncommon, either. Of course, if you don’t manage your capital well (i. e., use stop losses), you could lose everything. So, only use high leverage for short bursts of day trading.
Leverage In Trading Forex
Properly used, leveraging your trades in forex can be a boon to your bottom line. When thinking about leverage, keep the following in mind. For really short-term trading (i. e., under 1 hour), using a 100:1 (or more) leverage ratio is probably appropriate. For “swing trading” (i. e., trades that are anywhere from 1 to 48 hours long), reduce your leverage ratio down to 50:1 or lower. For “trend trading” (which hopefully doesn’t last more than a week), go even lower: 30:1, maximum. And, always use stop losses! In this fashion, the chances of your position getting barbequed by a price spike are minimal, particularly if you’re watching the global economic calendar and aren’t attempting to front-run any major news announcement.
Forex Makes Investments More Profitable
One potentially profitable way to trade the AUD/USD, on a very short-term basis, is to open up a 15-minute chart and put 2 exponential moving averages (“EMAs”) on it. Make the first EMA 8-periods long. If things are volatile, make the second EMA 32-periods long. (If things are mellow, make it only 20-periods long.) Now, add all of the following to the chart: 1) a “Linear Regression” (to see the trend clearly); 2) an “Awesome Oscillator” (to watch momentum build and dip); and, 3) a 5-period, “Fisher Transform” (which should act as an EMA crossover trading signal confirmation). Trade only when the 8-period EMA has crossed over the longer period EMA and you are entering a period of increasing momentum.
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