Advantages Of Trade In The Forex Market Part 2

By in Intro to Forex on October 29, 2020

Price differences:

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Those who traded in other markets, for certain know the term price “differences”. “Differences” arise in case of sharp “jump” of the price from one price level to another, without any steps of increment. For example, you trade the share which has the last quotation at the moment of closing of the auctions of 10 dollars, but as a result of any event which have occurred for night, its first opening quote constitutes next day 5 dollars and continues to decrease throughout all day.

Jumps raise degree of uncertainty which can become a hindrance for strategy of the trader. Probably, use by the trader of orders stop-loss (restriction of losses and preserving of profits) becomes the most serious occasion to anxiety. In a similar case if the trader places the order stop-loss at 7 dollars as doesn’t wish to participate in the auctions if it is reached point of 7 dollars, its transaction remains opened for the night, and next morning will entail a loss, much more greater than it is possible to assume.

If to look at some forex schedules, it becomes obvious that price “differences” are insignificant or completely absent, especially on the long-term periods: 3 sentries, 4 hour and daily schedules.

High volatility

Possibilities to do business arise thanks to a price fluctuation. If you purchase the share for 2 dollars and its price won’t change there will be no possibility to get profit. The size of level of the given fluctuation and its frequency are called as variability (volatility). Variability (volatility) allows the trader to get profit. Large-scale operations and high liquidity in a combination to a smaller kit of trade instruments generate the big variability in the exchange market during the day, than can be used by day traders. High variability of the exchange market testifies that potentially at the expense of trade in currency the trader can earn in 5 times more, than at the expense of the most liquid shares.

Variability is a measure of the maximum profit which the trader under condition of the maximum foresight can create. Variability of the most liquid securities is broken a set from 60 to 100. Variability in sphere of currency trade constitutes 500.

In this respect currencies act as the best trading mechanism for day traders in comparison with the security markets.

For the practical tips about forex trading – please visit this site.

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