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Millions of Americans—over half the population, in fact—engage in the twists and turns of trading on the stock market. These commodities are a perennial powerhouse in the portfolios of some of the nation’s greatest wealth generators and up-and-comers alike. However, the real sharks in today’s trading world leverage their capital in a number of different markets in order to see the greatest return on investment: That means dealing in forex, among others.
Forex trading might sound like a daunting proposition to the newly initiated, but rest assured, like any other market or tradable asset, forex trading relies on a number of basic principles just like all other instruments of wealth generation. Knowing these rules will make you a formidable trader, and succeeding in the forex market will make you a wealthy one. This is because forex trading relies on leveraged trades rather than direct capital buys as in the traditional stock market model.
The concept of leveraged buys is a fascinating one. Essentially, you are utilizing your broker’s money to invest a greater stake into the position bought. This is a common feature in forex trading, but should be managed carefully. With leverage buys, you are liable to see dramatic gains in your portfolio in days rather than months. But this can come at a cost: Without a conscious strategy, you are equally likely to experience wild depreciation of assets, as well. Leverage gives you the ability to profit from high value buying, but you can also lose huge value, if you aren’t careful.
For this reason, forex trading should be approached as a teachable skill. Professional stock brokers have spent years honing their craft, but at the end of the day only about five percent are able to beat balanced index funds that mirror market movements. As well, some of the heroes of stock picking of the past, such as David Baker, followed up meteoric successes with equally impressive failures. Forex isn’t like this, with a careful eye and a strategic approach following metrics such as the Bill Williams awesome oscillator calculation, forex trades become something of a science rather than voodoo on the Standard & Poor’s market.
The difference lies in the utter confusion associated with stock market metrics. Everyone swears by a different indicator, and when you try to measure market performance through a series of these markers, you end up staring through a spider web of conflicting data points and steeply sloping lines veering every which way. The oscillator pattern strategy in forex currency pairs uses a histogram that display the intensity of price fluctuations. In order to enjoy routine successes, you must keep a keen eye out for a recurrent peak in one direction. This shows a building price reversal that is then confirmed as soon as the histogram crosses the 0 marker before continuing its surge. Simply buy at the crossover, implement a stop-loss at the price point that corresponds to the second peak, and wait until the oscillator value registers consecutive red bars to sell and take your profit.
Forex trading can be especially lucrative for younger investors for a number of reasons. Sadly, only about one third of younger Americans have taken up investing, spurred on by a frozen vision of the market crash only a decade ago. But the market has seen an unprecedented resurgence. The dollar is up and the Dow is above 22,000 for the first time ever. Now is the time to capitalize and begin building wealth for the future, primarily because of that time endowed to the young. Coupled with the leverage employed in this market, time is your greatest asset. Simply put, as a 60 year old, you must consider how to protect your nest egg in order to make it work for you for the remaining decades of your life. As a 20-year-old investor, your primary investment concern is to build as much capital as you can over the next 40 years in order to arrive at that problem in good standing. Therefore, it is absolutely essential for young savers to attack risk head on, the market will naturally grow to recover any short term losses you will incur over the next four decades.