When you trade foreign currency exchange, you have to put down a cash deposit for every forex contract that you trade. This deposit is usually called your “cash margin” and it will be kept in escrow as long as your trade is open (meaning that you can’t use the cash for anything else). Depending upon how much leverage you decide to use, your cash margin account could 1% or 2% or even 10% of the value of the contract you are trading. The less cash down, the higher the risk. If you’re having trouble with this idea, just think of an upside down pyramid. The tinier the end point, the bigger the chance the whole thing tips over, right? Well, if you only have 1% down, then you have got a pretty bigger pyramid of a trade sitting on top of your cash, don’t you?
Technical analysis can help you sort out when to trade and when not to. Exponential moving average lines are well suited for day trading purposes.
Making Accurate Calculations In Foreign Currency Exchange
When you are trading, you really do not need to worry about what the cash margin is for a standard contract. Somewhere on your trading platform, there will be a list of all currency pairs that can be traded and their cash margin requirements. Similarly, when you execute a trade, your trade execution box will show you (exactly) how much cash just got sidelined because of the trade you just put in. (The same thing happens in reverse when you exit your trade). Where things can go pear-shaped is if you have a broker that changes margins on you during a weekend. If this starts to happen, find another broker (because this is a signal of corporate cash difficulties).
Technical Analysis Trading Foreign Currency Exchange
Technical analysis is another term for charting analysis. This type of endeavour uses a variety of indicators on a currency pair chart to help you figure out when to trade. At its broadest level (i. e., weekly charts), you can see trends. Daily charts, on the other hand, are good for seeing what might happen “this week”. 4-hour, 1-hour and 5-minute charts are excellent for day trading. Some indicators work best on weekly or daily charts (e. g., “Bollinger Bands” or “Ichimoku Clouds”). Other indicators, like “Fisher Transform” or “SMI Ergodic”, are far better suited for short time periods. Using 2 different indicators to confirm a trade signal is a very good idea (but, using more than 3 is overkill).
Increasing Foreign Currency Exchange Profits
If you open up a 5-minute chart of the AUD/USD and put just 2 exponential moving average (“EMA”) lines on it, you can try your hand at day trading. The first EMA should be set for a time period of “8 periods”; the second EMA should be calibrated to “34-periods”. This means that the 8-period EMA is going to lead the 34-period EMA (which is good, since that’s your trade signal line). Now, just sit back and watch the 8-period EMA. When it crosses over the 34-period EMA, that’s a signal for you to bust a move. If the 8-period EMA is moving upwards, buy. If it’s moving downwards, sell. To get out of a trade, reverse your initial order.