In order
to maintain a diversified and growing portfolio, stock holdings need to
be balanced by foreign exchange positions. Currency rates, economic issues
and the health of the company in question compound the impact of stock
positions in your portfolio. Forex provides the diversity that is necessary
to maintain consistent portfolio growth.
>> Forex Brings Profit in Bear and Bull Markets
In the foreign exchange market, there is no short selling restriction.
There is potential for profit in currencies regardless of which way the
market moves. Forex always involves selling one currency to buy another,
so there is no structural bias to the market. Depending on short and long
positions, a trader always has an opportunity to profit in a fluctuating
market.
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>> Forex Provides up to 50 Times the Leverage of Stocks
Foreign exchange trading with TSD can give you up to 50 times the leverage
of your stock trading accounts. For every US$1,000 you invest in stocks,
you gain control of at the most US$2,000 worth of shares. But with TSD,
margin of only US$2,000 gives you control of a currency trade of up
to US$200,000 in currencies.
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>> Forex Makes Money on Interest News
Any significant news regarding interest rates directly impacts the international
financial markets. In the past, when a country has raised its interest
rate, its currency strengthens relative to other currencies as investors
shift assets to gain better returns. The influence of stock markets
has changed this equation since increasing interest rates are typically
bad news for the stock markets. Investors transfer money out of the
stock market when interest rates rise, which can cause the currency
of the country to weaken on the broader markets.
Determining which effect will dominate can be difficult, but there
is typically a consensus in the marketplace as to what a rate change
will do. Rate changes are typically anticipated since they usually take
place after regularly scheduled meetings of central banks. Indicators
that typically have the biggest impact on interest rates are PPI, CPI,
and GDP.
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>> Forex Offers Broad Diversity
The balance of trade between nations is one determinant to the relative
value of these currencies. A nation that imports more than it exports
has a deficit trade balance, which is considered unfavorable to the
value of that currency. Prudent investors know that they should diversify
the U.S. Dollar balance in their assets through holding a range of currencies.
This is challenging since most U.S. banks do not offer foreign currency
accounts. Through foreign exchange trading, you control hundreds of
thousands of dollars worth of currencies with up to 50 times more leverage
than with your stocks. For every US$1,000 margin deposit, you control
up to US$100,000 worth of Euros, or Pounds, or Yen, or the currency
you believe will outperform the U.S. Dollar in the future.
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>> Forex – Perfect for Technical Traders
Currencies rarely spend time in tight trading ranges, and there is a
tendency for strong trends to develop. Over 80% of trading volume is
speculative in nature, so the market frequently overshoots before correcting
itself. A technically trained trader can identify these breakouts, providing
a range of opportunities for entering and exiting positions.
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>> Analyze a Nation like a Corporation
Currencies are always traded in pairs –one currency is purchased with
holdings in another. As with stocks, better FX returns are provided
by the currency of a country that demonstrates faster growth and is
in a better economic condition that others.
Currency pricing reflects the amount of available supply and demand.
Interest rates and the relative strength of the economy are the two
primary factors that determine the availability of a currency. Leading
economic indicators reflect the economic health of a nation, and are
in large part responsible for shifts. An overwhelming amount of data
is available at regular intervals – the challenge is to determine what
factors are more influential than others. Interest rates and international
trade ratios are typically the most important.
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>> Trade Forex 24-Hours a Day
Forex trading is a window to the world economy. Trading starts on Sunday
at 5:00 PM Eastern Time with the opening of the markets in Singapore
and Sidney. A couple of hours later, the Tokyo market is open. Next
is London, which opens at 2:00 AM Eastern Time on Monday. And by the
time the day catches up to New York, the world currency markets have
been at work for fifteen hours. You determine the timing of your trades,
instantly reacting to any news or market pressure. Trading stocks when
the U.S. markets are closed is not easy and does not provide much liquidity.
With forex, you can trade 24-hours a day in the largest and most liquid
market in the world.
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