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Wednesday, September 19, 2012

Forex Trading Hedging Strategies Saudi Arabia

Hedging is the practice of limiting the total portfolio risk by utilizing counter trading strategies of existing trades. It is the way to reduce the high amounts of loss than can happen when the unexpected happens. There are many forex hedging strategies available.

  1. Direct Hedging: It is the practice of placing trades that buys and sells same currency pair at same time. The trader can profit from the market by carefully adjusting the position closing timing. As sounds, the strategy is a poor hedging strategy with low expected return and can only be practiced when there is very high uncertainty in the market or the price show rapid ups and downs.
  2. Multiple Pair Hedging: This is the practice of trading two or more related currency pairs at same time. If two pairs are used, then they should be in opposite co-relation that is if once price fall, other should rise. Some forex hedging strategies can include many different currency pairs and needs advanced fore trading systems.
  3. Forex Options: They are the most followed and effective forex trading hedging tools. The strike and put options are widely used by forex traders to hedge their forex positions. More over, traders can utilize a number of different options trading strategies to magnify their profits or limit their risks.

Forex hedge traders can be part of very active forex trading strategies and are not merely loss-minimization strategies. In fact hedging allows traders to take more risks in positions when needed. Not all forex trading brokers favor hedge strategies, so you should choose wise.

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Monday, September 10, 2012

Why Some Forex Currency Traders Fail?

Just like stock and other financial instrument trading, not all forex traders profit from the market. There are many reasons for this, below are the some most common ones.
  1. Lack of Trading Discipline: Perhaps the simplest successful forex currency trading strategy is big wins and small losses. Traders have to limit their losses and to maximize their returns. They should have a sound trading strategy and good discipline for this. Letting the fear and greed to control the trading decision is the most common reason for failing.
  2. Not Having a Forex Trading Plan: Learning about the currencies, pairs and market movements are very important prerequisites for forex trading. Many traders do not have any plan at all for placing orders, stop-losses or risk management.
  3. Not Learning from Previous Experiences: Demo trading and learning most trading strategies are just initial steps for a successful trader. One should learn from his wins and losses and from the same of others.
  4. Keeping Very High Expectations: The ambition to be a millionaire overnight can be a very bad contributor to the trading losses. Actually it leads traders to a situation of gambling. They forget their risk-tolerance and try to bet for unrealistic gains; eventually losing all that they had in hand.
  5. Poor Money Management:  Diversification of currency investments and proper risk management are important for trading success.
  6. Poor Leverage Management: Forex trading involves very high leverage and low margin requirements which allow traders to place very high amounts of currencies with low capital investment. This can magnify the profits and losses alike and can result in margin call from forex trading brokers. For more read Forex Leverage – An Overview.

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