If you believed most guidance about trading Forex, a prudent man would never even try. Read the comments below as an evidence. (Trading Consultants Inc. does not agree with any of the major points of the article that follows. It’s content and advice are typical of the FakeNews narrative that discourages us from achieving freedom via trading.
Trading foreign currency directly is tough, meaning not as easy as stocks. Forex trading is a heavily involved activity due to the 24-hour nature of the business. It also involves managing margin, fees, and plenty of other things. It also requires a fairly substantial monetary investment to be really effective, though the draw of massive margin from overseas brokerages make some people think they do not need a large investment. The reality is that you shouldn’t be using the amount of margin you may be offered.
There is a way to jump into currencies through the stock market. There are plenty of ETFs for the main currency pairings in both the long and the short direction, which allows you to go long on a short ETF for people who use IRAs to trade. The ETFs also come in the “ultra” variety, which means leverage is used.
Currencies are About Movement
Currencies are all about movement since they trade in pairs. A currency can be flat, but if its paired currency changes the pair moves. Some currencies fall into long-term trends, though sometimes government act to counteract the prevailing trend like Japan. However, some currencies are stable within a range. There is, however, a lot of money that can be made even with the slightest fluctuations so the movement inside the established range still presents opportunities, but this is more for direct Forex trading. With ETFs, you would be looking for slightly larger movements, but that means a week and above in order to let the macroeconomics play out.
Another thing about currencies is that if you have the option to go long or short, directly or via ETFs, then there is no point in worrying about a general decline in stocks. A lot of people keep plenty of money in IRAs, which force them to go long. That makes them sensitive to recessions, and it is a prevailing concern for people who are long the market. On the other hand, when they stay in cash or bonds then you can have very low returns.
Currencies are all about relativism and there for can still bring in returns during a recession.
Currencies tend to be less sensitive to sentiment less since massive banks, nations, and corporations are players in the currency market. They are not there as traders to make a return, but for the purpose of doing business or minimizing risk. With currency, you need to analyze the concrete long-term information and the short-term technicals.
Currencies are not easy. It is helpful to keep an eye on currencies as a gauge of the economy, Currencies are complicated and require a large amount of research.
Technical analysis is very effective. The things that effect currencies the most tend to be governmental or central bank policies. These are usually indicated far in in advance. Also, economic data works on a longer timescale so it follows well-established trends and is also telegraphed most of the time. This makes technical analysis more robust in currencies because there are fewer surprises.