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Monday, June 18, 2012

Advantages of CFD Trading over Stock Trading

Contract for Difference (CFDs) are considered as more flexible trading instruments than stock and indices. Here are some of the advantages of CFD trading over stock trading.

Better Leverage: CFD trading involves higher leverage than stock trading. Generally stock trading involves 50% margin requirements, meaning you should have capital of 500 for trading a contract size of 1000. But the CFD trading margin ranges from 1% to 20% depending upon the liquidity of the underlying asset. Fore example with 5% margin, one can trade 1000 worth contract with just 50 as capital investment.

Trading Products across the Globe: While stock trading is limited to a handful of country specific or market stocks, CFD traders can trade products in all world markets. Trades can be executed anytime the market is open on the trading platform. Click here to know the CFD range of products Orient Finance offer.

Getting Trade Executions with No Fees: Like online forex trading, CFD trading does not involve any trading commissions. The difference in ask and bid spread is the broker's remuneration. This spread is often fixed and usually there are no hidden charges or additional fees. Moreover CFD brokers offer all order types as traditional stock brokers offer.

No Day Trading Requirements or Shorting Rules: CFD trading has much relaxed rules and regulations than stock trading. There are no day trading requirements; traders can day trade whenever they want. At times stock markets can restrict traders going short; but in CFD trading one can go short any time they want as there is no ownership of underlying asset, no burrowing costs or shorting costs.

And a Range of Products: Now CFDs are available on a wide range of underlying products. These include currency pairs, shares, stock indices, commodities, treasury products and more.

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Wednesday, June 6, 2012

Forex Trading and Moving Average (MA)

Moving Average (MA) is one of the most popular, most followed and old trading indicators. It is used extensively by all kind of traders including forex traders and stock market traders. MA is a chart smoothing indicator showing the average value of the price changes for a currency pair or security for a period of time. Generally a MA is named after the number of period of time it represents. Eg: 50 MA shows the average values of 50 periods/days.

Traditionally there are two types of moving averages; and are usually used on same chart simultaneously - they are short-term and long-term moving averages. As indicated by name a short-term MA shows averages of a shorter period of time like 10 or 15 days and long-term MA shows averages of a longer period of time like 50 or 60 days.

Analysis of moving averages are very easy and straight-forward, when short-term average crosses above long-term one, then the upward momentum of currency pair or security is confirmed and when it crosses below the long-term MA, downward momentum is confirmed. Moving averages are also used in forex trading to find out long and short term support and resistance levels where the number of times the price hit a moving average increases the validity of support or resistance level.

Moving average is a very good indicator to analyze existing and past market movements, but it does not predict anything about the future. It is good tool for confirming trends and trend changes and for placing stop-losses and placing entries but is a poor tool for setting targets, exit points or profit levels. There are many variations of moving averages available - simple MA, Exponential MA and Weighted MA.

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