Wednesday, July 16, 2008

Currency trading at Saxo Bank

A currency market that is fluctuating is an opportunity as opposed to when the market doesn`t fluctuate. The reason for that being in currency trading one trader could only make profit when the pair is moving.

As an example I would like you to imagine the EUR>USD pair. A country`s currency is never quoted in itself. It always gets a quote - or a value - in report to another country`s currency. In this case, the EUR>USD has recently reached a 1,6000 range and above.

That was from 1,4000 some 6 moths ago. At the same time the GBP>USD has reached the $2 per 1GBP.

The question that comes to mind is how can someone take profit in a moving currency market? The beautiful thing about it is that a pair can go both UP as well as DOWN and you can still make money on it. Why would that be?

Take this as an example you have a "lot" of 30 000 EUR USD that you invest. Meaning if you have proof/ reasons/ strategy to indicate the dollar will gain strength against the EUR then you should BUY the dollar. That is actually done for the EURUSD pair by SELLING the Euro which at a rate of 1.6000 will mean 18750 EUR paid for 30000 USD. Say the dollar gains and gets to be 1.5000 then you would buy back the EUR but 30000 USD would now buy 20000 EUR meaning you got a profit of 1250 EUR.

Caution please as this kind of move (1000 pips) does not happen over night - it takes months and this should probably be a long term position.

A really interesting experience is with Saxo Bank as they provide a really good platform and good leverage too. Plus their positioning in Denmark leads to the conclusion that Saxo is a pretty safe option to go with.

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