Currency volatility may appear rather normal to many, but there is a big difference to seasoned Forex day traders. Day to day moves up or down, or anything around 1% isn't much to write home about. A double digit move in a matter of minutes, often caused by a Black swan event, is notable!
Currency volatility may appear rather normal to many, but there is a big difference to seasoned Forex day traders. Day to day moves up or down, or anything around 1% isn't much to write home about. A double digit move in a matter of minutes, often caused by a Black swan event, is notable!
OANDA (www.oanda.com) boasts of a high level of trust and reliability, as evidenced by its impressive Trust Score of 93 out of 99. While OANDA is not a publicly traded company nor does it operate as a bank, it is subject to regulation by seven Tier-1 regulators, signifying a highly trusted status. Additionally, it is supervised by one Tier-4 regulator, which means that users should utilize a cautious approach to risk management. eToro.com is a reputable trading platform, famous in the social trading industry. In 2018, the brand decided to conquer the US market and launched the local brand there. First, the company functioned solely as a crypto trading broker. Yet, later it added other items to its list of tradeable assets. Therefore, now it offers stocks and ETF trading as well. With a history dating back to 2007, eToro has amassed a large user base across more than 140 countries. When cryptocurrency emerged, the brand used a unique chance to enter the American market. One of its key features is CopyTrader, the social trading tool and a proprietary product of the project. It allows novices to repeat trades from top traders with just a few clicks. Thus, the tool offers a fresh approach to this asset class. This guide aims to provide a comprehensive eToro review to help traders make informed decisions. eToro offers trading services across many regions worldwide including the USA A standalone copy-trading ecosystem, providing equities, foreign exchange, commodities and cryptocurrencies markets. Provides a global selection of brokerages.
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OANDA Corporation is regulated by the CFTC/NFA. OANDA is a member Firm of the NFA (Member ID: 0325821). CFDs are not available to residents in the United States.
On any given Forex trading day, you will see a chart representing a currency pair, heading in a general upward or downward direction. The graph on the chart is not straight. it's trajectory is more like a drunken ant staggering back to its termite after one too many. This daily price action movement, often called volatility is caused by supply and demand. If in any given minute, there are more buyers, the graph will tick up, if there are more sellers, the chart will tick down. This explains why although there is usually a trend up or down, the trajectory is not linear.
Very is the answer for retail Forex traders! One of the primary drivers of Forex is the yield on a currency. When a central bank adjusts the interest rates of the currency it looks after, this affects the desire of investors to own or sell it. Although interest rates were primarily used to control the flow of money, they are now seen as emergency tools by central banks to stop recessions. Large cuts in interest rates will often lead to currency volatility, as traders price in the new reality.
Governments have a history of putting their foot in it. Many politicians aspire to the top job in their country with dreams of changing the system. Problem is, a crisis is often lurking around the corner. They start off following their dreams, but are brought down to earth with a crashing bang. A currency where a politician is following his dream of exiting a relationship with close trading partners, will not be well received. Forex market participants will sell that currency, in favour of one where politicians have a little more 'nous' with regard common sense economics.
On the other hand a politician who follows an unpopular economic policy which makes economic sense, will often be rewarded with their currency appreciating. Either way, for those favouring volatility trading, politicians are a dream!
Central banks were historically dull places which only traders paid attention to. Today governors are rock stars worthy of front page news. As a result they are covered in great detail by the press. Through their use of interest rates, central banks already have an influence on currency volatility. This influence increased even more through their use of quantitative easing. Anyone watching Mario Draghi's famous press conference, where he stated those immortal words that he would do 'whatever it takes' to protect the Euro, will not have failed to notice the positive and volatile response in the price of the Euro!
In times of panic people run to the hills for protection, on in a modern twist, to buy loo roll from the supermarket! How times have changed. When Forex news is bad, there is only one currency to hold: US dollar! The United States is the safest economy in the world. It also has a sound judicial system and (relatively!) stable politics. This makes the US dollar trusted beyond any other currency.
In times of stress, all currencies, even major ones such as the Euro and Sterling, will sell off as people rush to hold US dollars. Perhaps only two currencies have a similar status. The Yen and the Swiss France whose currencies are seen, for different reasons, as safe places to hold currency.
There are any number of reasons why currency volatility can become apparent. The daily up and down, is little more than just 'noise'. The big moves happen because of an unforeseen event. This event is either not priced in, or which the market is not yet capable of quantifying. For those wishing to learn to trade Forex, it is often worth going back in history to see which events have caused currency volatility. This will arm you with a basic knowledge of how to interpret feature economic crises and the effect on currencies. In turn, this will give you an advantage as you seek to profit from this volatility!
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