How can you hedge a US portfolio of shares when the US Dollar is going down?
Hedging is a strategy used as a means of removing or at the very least reducing the uncertainty of exchange rate fluctuations on your portfolio returns. The method you employ to hedge your portfolio will depend on a variety of factors. The first step in choosing a hedging strategy is to quantify your exposure. For…
What is the uptick rule, and how does it affect forex trading?
US regulators revoked the “uptick rule” on the 6th July 2007. Previously the uptick rule, which was implemented in the 1930s following the US stock market crash, was designed to ensure it was more difficult to short sell stock. Under the so called uptick rule, a short sale may only take place if the market…
How do currencies move in relation to each other?
In order to be an effective trader, it is important to understand how different currency pairs move in relation to each other. There are a few reasons why this is significant, but most importantly, it allows traders to understand their exposure. As we have stated time and again, correlations between different currency pairs will inevitably…
Why do forex traders always talk about range trading?
No, range trading doesn’t require you to use a laptop while you are in the saddle….it is a way of taking advantage of markets where a clear trend exists, and prices range up and down within a well-defined channel. Range trading is a strategy that depends on selling highs and buying lows of a well-defined…
Why does the average forex trading strategy lose money?
Extreme forex market volatility and major headlines has made forex trading more popular than ever, but the lightning-quick influx of new traders has been matched by a similarly dramatic outflow of existing traders. Market conditions remain as challenging as ever, and many novice forex speculators have found it very difficult to preserve capital – much…
What’s the difference between top down and bottom up investing?
There are many different approaches an investor can take when looking at buying shares, and whilst top down and bottom up are completely different in their strategies, their desired result is exactly the same – to pick out the stocks which are guaranteed to deliver the best returns. The top down approach focuses on the…
Is volatility a good or bad thing for trading CFDs?
The attention of the world remains firmly focused on the US share market as volatility reigns supreme. We have seen extraordinary volatility over the past weeks as the economic outlook continues to worsen and consumer confidence remains low. As such, we have seen unprecedented fluctuations in other asset classes and instruments as Gold and Oil…
Does trading based on news and events work?
Event Driven Trading is any strategy that seeks to exploit pricing inefficiencies, occurring when companies are involved in corporate events such as mergers, takeovers, restructures (including share buy-backs, spin-offs and capital returns), de-mergers and lock-up expiries. Traders, who follow event driven strategies, attempt to predict the outcome of a particular corporate event on the security…
What is the 2% rule and why should all traders know about it?
When deciding to enter a trade the most important decision is determining how much to risk on the trade. The 2% Rule represents the actual percentage of a trader’s capital that he or she is willing to risk on a single trade should it go against them. So a trader with $100,000 capital will risk…
CFD traders are using the 80-20 rule – what is this?
There are numerous trading strategies that CFD traders are currently using. Strategies may vary from pairs trading to arbitration plays, portfolio hedging and more complex butterflies. I want to discuss a very basic strategy that many traders are using although there are traders out there that are still oblivious to this strategy. Those of you…
