Currency Trading as an Alternative to Oil or Gold Trading
Posted by Edward Dy on July 15th, 2008
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Photo Credit: Blackrabbit33
Any commodity trader, especially seasoned ones, may find it worthwhile look at currency trading as an alternative to trading commodities.
Why is this so? In general oil, gold and currency have similar outlooks - a surge in one usually also means a surge in the others. Also, traders may an also earn interest if they happen to be on 2 percent or higher margin.
When you trade currencies, you should take interest rates into consideration. To cite an example, a trader who was long CAD/JPY would be able to make nice gains plus up to 3 percent earnings in interest income. The 3 percent estimate comes from Canada’s central bank rate, which is the amount earned, and deducting the 0% rates paid for shorting the Japanese yen.
These rates are unleveraged, meaning that with 10 times leverage, net of any exchange rate changes, there would be that much higher interest income. Please note that leverage will also render the trade riskier - something you should always remember when trading forex.
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