Lastly, to find the minimum tick fluctuations for different currency contracts was the video that was posted today on our YouTube Channel.
GOVERNMENT REQUIRED RISK DISCLAIMER: FUTURES & FOREX TRADING HAS LARGE POTENTIAL REWARDS, BUT ALSO LARGE POTENTIAL RISK.
UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING.ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY.
Currency Direction Starts ChartPAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. The primary difference between currency futures trading and spot FX is when the trading price is determined and when the physical exchange of the currency occurs.
Keep in mind that most participants in the futures markets are speculators who usually close out their positions before the date of settlement and, therefore, most contracts do not tend to last until the date of delivery. In the spot FX market, the price is also determined at the point of trade, but the physical exchange of the currency pair takes place right at the point of trade or within a short period of time thereafter.
Since 99.9% of traders do not take delivery of the actual currency and offset their sale or purchase before delivery takes place there is very little difference between the two methods of trading currencies.
Believe it or not the biggest reason why people stay away from futures contracts is because they have trouble determining how to calculate the correct values for price changes and fluctuations. Currency futures contracts as well as FX contracts trade similarly to other stock and futures markets and most technical analysis methods work with currency markets exactly the same as with other stocks and commodity markets. The other major difference between the currency markets and most other financial markets is the opening and closing hours. Since currencies trend substantially more than other financial markets, it would make sense to utilize trend following or momentum style indicators when analyzing the currency markets. Tomorrow I will go through several examples showing you how to apply both indicators to currency futures trading and how to tweak the settings to make the indicators respond best. The EMA is one of the best indicators for trading currency futures as well as cash contracts. YOU MUST BE AWARE OF THE RISKS AND BE WILLING TO ACCEPT THEM IN ORDER TO INVEST IN THE FUTURES AND FOREX MARKETS. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. With futures, the price is determined when the currency pair is exchanged on the delivery date, which is usually sometime in the distant future.
While there are small regulatory differences, commission differences and spread differences, the main characteristics of trading currencies remains the same. Unlike stocks that are calculated using simple dollars and cents share prices, each futures contract has a different contract size and each tick value or minimum price fluctuation.
Two indicators that work well with currency markets are Exponential Moving Averages and MACD Momentum Oscillator. THE PAST PERFORMANCE OF ANY TRADING SYSTEM OR METHODOLOGY IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. Once the minimum tick value is understood traders can begin analyzing currency futures contracts the exact same way they analyze different stocks. Back testing results show that currency contracts trend about 55% of the time, while other financial markets such as stock indexes, precious metals and bonds only trend about 30% on the average. The currency markets never close and trade around the clock in order to provide valid exchange rates to banks around the world. The latest estimates show that the foreign exchange market trades about 2 trillion dollars worth of currencies each 24 hour period last year.
Dollar Index (USDX) futures contract is a leading benchmark for the international value of the US dollar and the world's most widely-recognized traded currency index. In a single transaction the USDX enables market participants to monitor moves in the value of the US dollar relative to a basket of world currencies, as well as hedge their portfolios against the risk of a move in the dollar.
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