Trading Exotic Currencies - Five Things You Must Know

Forex trading can give you above average returns. Major currencies like USD, GBP, EUR, JPY, CHF etc constitute the majority of the volume of currency trading. There are some pairs with one currency from the majors like above and the second currency in the pair is usually from developing countries from Asia, Africa, the Pacific and Middle East. These are called exotic currencies. Exotic pairs carry more risk than the majors. They have higher spread making the trade expensive. They trade in thin market. But that doesn't mean that you can't trade such currencies. Know your risks and you can get stellar profits from exotic pairs.

Exploit the High Volatility

If you are a trader, you can make the most of your fortune from the volatility. An average trader gets scared of volatility. But a seasoned trader knows it is in volatile markets he will make the killer money. Exotic currencies are very volatile. If you have a significant experience of trading the currencies, then exotic pairs will present you some opportunities which will give you a long runner. Usually volatile exotic pairs move very fast. They make bigger moves than the major currencies. If you are comfortable with such a big move, you can venture into this fancy part of currency world.

Trend Is Your Best Friend

It is a famous saying that for a trader trend is the best friend. If you can identify the trend early, home run trades can be found easily. Exotic currencies move fiercely when they are set in a trend. Compared to majors, these currencies make one sided move for a long time. Though they are risky, they reward you handsomely when they make one sided move with the trend. Spotting the trend comes to you when you have spent some time with the charts. So trading these pairs are definitely for the newbie.

Clear Charts to Analyze

Exotic currencies print the charts clearly. It is easier to analyze the charts of these pairs. There is not lot of consolidation as these pairs tend to move in a trend. Get your basics with the chart in place and you are good to go with these currencies.

Exposure to Commodities

Many of these pairs are correlated to commodities like gold and oil. The currencies of countries like Norway, Mexico, and Russia are strongly correlated with oil. South African Rand is closely tied with gold as it is one of the major producers of gold. You can get exposure to these commodities with the help of exotic pairs.

Diversify Your Investment

Apart from a short term perks; exotic pairs offer some other advantages. It gives your portfolio much diversification. If you have invested heavily in the developed countries, investing exotic pairs will spread the risk of your portfolio.

Trading exotic currency pairs requires good spread and fast execution. See where you can get this at HotForex review. No trader can win with continuous requotes. Check out a non-requote broker with good selection of exotic pairs on Trading Point review.

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Secrets to Be Handled in Trading Forex Currencies

Trading of the foreign currencies is so-called the duty of the currency market or the forex market. Before involving trading it, it's better to see advice from the professional guidance as to whether it's real advice able to get into the forex trading. It's an ocean were with only some handful of personal experience we can gain things. Generally people in the investing sections of the forex market gives less suggestions for the forex trading. It's not advised to all level of people so far, only a few amounts of traders have moved with a good result. Due to market volatility, it's better to be in the experienced hand so then we will be in the problem free zone.

The currency markets always do what it actually wants to do. And it's very difficult on the part of the investors to always give a focus on the market directions. Each and every day of the market will gives us to face new challenges. Even the economic rumors can increase or decrease the price of the currencies. The currency prices are not only depending on the markets but also some of the traders have the control over the currency trading. In many times the traders can solve many issues with the pricing, they help in cutting of losses happening with the prices and trying to change the moving markets direction. There are some of the common strategies were we can do a safe play, by previously handling correctly the calculated risks at the required time and place. Try creating the profitable needs for the investor than giving them loss.

Plan all the activities. The decisions taken by the traders should be acceptable and make the people for the long-term agreement. This makes the traders to explore with their jobs, attracts more number of people to have a successful business. The best trading plans will be utilized by the traders to completely focus on the growth of the business as well as to cut off the losses which come from the forex trading. This level of understanding of the forex market helps to have a better future in the forex trading. So as we have list out all the positive approaches to the customers coming across the negative sections of the forex industries, there should not be any greed, ego, possessive, over confidence, fear, spreading of rumors, and anger on the minds of both the traders of the forex and also the customers or the investors. The traders should never deviate themselves from the trading plans. More than this there can be general perspective applications which acts as the secrets for a good trade is that:

1) Choose the better instrument which you can understand it better for the forex trading. If it's not done properly the prices can variety with the times mixing up and down.

2) Go for the better research so that the deep learning of the things can give us the better solution. Refer all the related books and go through the net for the support.

3) Find all the possibilities for the profit-making and work for it.

4) Manage all the risks obtained carefully, be prepared for it.

5) Find all those mistakes and do not repeat it. This is the simple secrets from the better functioning.

Learn more about Forex Trading at Forex Trading Principles and claim your Free Special Report which is just packed full of related articles. Bing Wang has written a number of different articles on the subject and they can be found at Forex Tools Resource.

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How to Make a Killing as the World’s Strongest Currencies Topple

Who says you can’t have the “best of both worlds?”
I say you can – at least when it comes to trading foreign currencies.
For years, traders have debated about whether fundamentals or technicals drive foreign currencies. The “fundamental guys” say you should just watch fundamental data like a country’s unemployment, GDP numbers, and overall debt to choose the best currency plays.
The “technical guys” say you can learn everything you need to know about a currency by watching the charts.
Traders on both sides act like you have to choose one or the other. However, I’ve always said that there are benefits to both, so why not use both in your trading?
In my own analysis, I’ve always found that I make better trading decisions when I have more information. So I study fundamental data and technical charts to pick my best trades.
But I’ve found technical analysis really shines in times like these, when markets start to topple…
Technical analysis has saved me for the past 20 years. It’s the reason I’ve never taken a huge dent in my stock or my currency portfolios – even during the recession in 2008.
Why? Simple. Several indications on the charts tell you when the market may have far more downside potential than upside potential.
(And remember, stocks and currencies fall faster than they rise. So if you catch those huge down moves, you can rack up some decent profits.)
I’ve found that technicals reign during these downturns because no one focuses on fundamentals when everything seems to be crashing and burning.
You see, logic tends to disappear when markets start to fall. Fear takes over and investors simply react. Fear will trump fundamentals every time because fear is a much stronger emotion.
That leaves most “fundamental traders” scratching their heads.
Fortunately, currency traders who check charts (or “technical traders”) have several tools at their disposal that can tell you when it’s time to sell your stocks. That’s a simple way to avoid all bear markets.
Coincidentally, it’s also an easy way to make a killing off foreign currencies as they fall, because you can lock-in profits and start buying up more defensive currency positions.
Even better, they’re all pretty easy to spot…
The first tool is extremely easy to use. You simply draw a trend line on any chart.
Once that trend line notably breaks and you see a currency pair close below that trend line, you know it’s time to sell. You can see that on the chart below.
Trend Line Breaks show the Change of Control
from the Buyers to the Sellers!

This works with both stocks and currencies. With stocks, you can tell when the whole market is about to turn, if you look at big stock indexes. Take the real-time snapshot of the Dow Jones Industrial Average below for instance…


This Technical Tool Tells Me The Market is About to Fall

Besides drawing trend lines on your charts, one of the easiest things that even new traders can do is place two major moving averages on your chart.
These averages are called the 50 day Simple Moving Average (the blue line) and the 200 day Simple Moving Average (the red line on the chart above).
When the blue 50-day SMA is above the red 200 day SMA, then stocks are climbing. When stock prices fall below the 50 and 200 day SMAs and the two averages cross over, it’s a big flashing “sell” signal. It tells you to take your profits and go sit in cash for a while because a downturn is coming.
All of these things are a foreign language to some currency traders. It’s why pure fundamentalists struggle during downturns.
You should know that Dow chart is from earlier this week. This means we’re already approaching another downturn.
This stock index has broken an uptrend and has ceased to produce “higher highs and higher lows” anymore. The major moving averages have crossed and the index is now getting very volatile. In other words, look out below stock traders.
As I have written here before, the “fundamentally strong” Australian dollar will be one of the first currencies to fall when stocks fall apart again.
So I recommend taking evasive action right now. If you own the Aussie, take your profits now. If you’re a trader, look to short the AUD/USD pair in your Forex account.
While I can’t say that the huge sell-off starts tomorrow, it’s probably very close. Make sure you’re prepared.
Have a Nice Day,

Sean Hyman, Editor
Currency Cross Trader

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Emerging Market Currencies Brace for Correction

“It was the spring of hope, it was the winter of despair,” begins Charles Dickens’ The Tale of Two Cities. In 2011, the winter of despair was followed by the spring of uncertainty. Due to the earthquake/tsunami in Japan, the continued tribulations of Greece, rising commodity prices, and growing concern over the global economic recovery, volatility in the forex markets has risen, and investors are unclear as to how to proceed. For now at least, they are responding by dumping emerging market currencies.

As you can see from the chart above (which shows a cross-section of emerging market forex), most currencies peaked in the beginning of May and have since sold-off significantly. If not for the rally that started off the year, all emerging market currencies would probably be down for the year-to-date, and in fact many of them are anyway. Still, the returns for even the top performers are much less spectacular than in 2009 and 2010. Similarly, the MSCI Emerging Markets Stock Index is down 3.5% in the YTD, and the JP Morgan Emerging Market Bond Index (EMBI+) has risen 4.5% (which is reflects declining growth forecasts as much as perceptions of increasing creditworthiness).
There are a couple of factors that are driving this ebbing of sentiment. First of all, risk appetite is waning. Over the last couple months, every flareup in the eurozone debt crisis coincided with a sell-off in emerging markets. According to the Wall Street Journal, “Central and eastern European currencies that are seen as being most vulnerable to financial turmoil in the euro zone have underperformed.” Economies further afield, such as Turkey and Russia, have also experienced weakness in their respective currencies. Some analysts believe that because emerging economies are generally more fiscally sound than their fundamental counterparts, that they are inherently less risky. Unfortunately, while this proposition makes theoretical sense, you can be assured that a default by a member of the eurozone will trigger a mass exodus into safe havens – NOT into emerging markets.

While emerging market Asia and South America is somewhat insulated from eurozone fiscal problems. On the other hand, they remain vulnerable to an economic slowdown in China and to rising inflation. Emerging market central banks have avoided making significant interest rate hikes (hence, rising bond prices) – for fear of inviting further capital inflow and stoking currency appreciation – and the result has been rising price inflation. You can see from the chart above that the darkest areas (symbolizing higher inflation) are all located in emerging economic regions. While high inflation is not inherently problematic, it is not difficult to conceive of a downward spiral into hyperinflation. Again, a sudden bout of monetary instability would send investors rushing to the exits.

While most analysts (myself included) remain bullish on emerging markets over the long-term, many are laying off in the short-term. “RBC emerging market strategist Nick Chamie says his team has recommended ‘defensive posturing’ to clients since May 5 and isn’t recommending new bullish emerging currency bets right now….HSBC said Thursday that it isn’t recommending outright short positions on emerging market currencies to clients but suggested a more ‘cautious’ and selective approach in making currency bets.” This phenomenon will be exacerbated by the fact that market activity typically slows down in the summer chart above courtesy of Forex Magnates) as traders go on vacation. With less liquidity and an inability to constantly monitor one’s portfolio, traders will be loathe to take on risky positions.


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