subject: Trading the Main Global FX Markets [print this page] Trading the Main Global FX Markets Trading the Main Global FX Markets
The dollar and euro continue to fluctuate on the good and bad news surrounding their respective economies. Sterling is traded less than the dollar and euro but, along with the yen, is still one of the most traded currencies.
The key sterling FX pair is the sterling/dollar market where sterling is currently looking as strong as it has done for some time. The pound has retained the $1.60+ level and there is strong price support from $1.5945 all the way up to the $1.60 level. Investors seem to be holding the faith with the currency for the time being.
For the key euro/dollar market, we have seen a fair few swings throughout 2010 but there is high volume support around $1.3430/50 and that should support the euro unless the European sovereign debt position gets worse again.
Unfortunately though, a recent CMC Markets report has questioned both Eurozone data and European sovereign debt. "It's been a turbulent time for currencies and EU ministers have sought to reassure the markets that haircuts on bond holdings will apply only to new debtors and not existing ones" it read.
"This reassurance saw the euro rally despite Eurozone industrial production figures for September missing the target by some way, coming in at -0.9% against an expectation of a 0.3% rise. Also, 2010 Q3 growth figures in the Eurozone, France and Germany have all missed expectations."
All this leads to very volatile markets which can be exciting to trade, especially when you think about your potential profits. After all, making a profit is seldom a bad thing. However, any spread bettor or CFD trader should understand that they can lose money as well.
Whether you speculate on the FX markets by buying and selling currencies or make use of a more modern investment format such as Contracts for Differences (CFDs), the risks remain and must always been considered.
Nowadays, many investors are turning to financial spread betting. This offers a variety of advantages to both new and experienced investors. As we have mentioned, risks are an inherent part of investing. As with all investments such as trading shares, funds, pensions, housing etc, you can lose money. With spread betting you can lose more than your initial investment.
You should ensure that spread betting matches your investment requirements and familiarise yourself with the risks that are involved. Spread bets do carry a high level of risk to your capital. If necessary, seek independent advice.
The appeal of spread betting though is the wide range of advantages such as:
1) Spread betting offers a large variety of markets that you can trade on which includes the indices, commodities, stocks and shares, and, of course, the FX markets.
2) Investors are able buy or sell financial instruments. As a result, you can speculate on a particular market in the way in which you feel it is going to move. You are not restricted to speculating on an FX market to go up; you can also speculate on it to fall.
3) Because spread betting does not involve the transfer of ownership rights and is purely a bet on the future value of an asset, it isn't liable to income tax, capital gains tax or stamp duty*.
4) If you are buying and selling currencies then you usually have to pay commissions and/or brokers' fees. With spread betting, there aren't any such fees.
If you do trade the FX spread betting markets though, don't forget that with trading you need to control your greed. Also, if you use smaller stake sizes then this can reduce your level of risk.
* Based on UK tax law. Tax law can be changed or may differ depending on your personal circumstances.
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