Forex Without the Flaws

FOREX ETF’s: Forex Without the Flaws of . . .

Seemingly endless 24-hour trading periods.
Shock, Awe & Surprises
Sleeplessness
Skewed spreads
Self-sabotaging emotion

There are huge profits to be made in the foreign currency markets. There’s no doubt about that.

However, the process of trading these markets as presented to the majority of traders is flat out designed-for-failure.

There’s just too many factors that work against the trader when working through the standard online forex broker.

Yet, the profit opportunities and trends are there beckoning us. Taunting us to try just one more time. It’s the siren song finely tuned and sung to lead a trader to ultimate destruction.

The question we need to answer then is: “How do I trade the currencies to win instead of losing so often?”

The answer to that question was addressed in the previous report where we wrote of de-leveraging being critical to winning this game of trading.

This applies to Forex, in spades. Let’s take a look at our choices and see what offers us the best chance for success.

ONLINE FOREX ACCOUNTS?

The margin in the forex brokerage field is the stuff of legends. Even though some weak regulatory moves have been made to reduce it from 1,000:1 down to 50:1 lately, still, traders find themselves standing at the end of a 50 foot lever while the market is moving on only a 1 foot lever. Most would be well instructed to visualize this as an outdoor mental exercise with an extremely long ‘teeter-totter’ or board for a lever.

The important principle here, (one that would be learned in a split second in ‘real life’) is that the movement of only one inch ( a few pips) on one end of this lever would launch the poor trader standing on the fifty-foot segment opposite the fulcrum an eye-opening, breath-taking 4-feet into the air.

This would be equivalent to a margin call in forex with many dollars lost from the ‘flight’.

We’re inclined here (maybe it’s my age), after all these years, to avoid such adventures in trading, so, let’s calmly look for another venue for profits from the same market. NO, these won’t work for us.

FOREX FUTURES?: The futures market for currencies just won’t do for similar margin reasons. We’re left standing at the end of too long a lever again. Forget them. NO.

ETF FOREX TRADING? : Fortunately, there are now ETF’s that cover the currencies of interest for us.

Finally, here’s a way to have forex trades go overnight without being glued to a monitor screen.

What’s more, we can take advantage of the valuable, long-term trends without being flushed out of the market by a questionable spindle or sudden stop-busting run up and then down only to continue it’s previous trend as if nothing had happened.

Well, holding the ETF or the option, we just won’t care about these little market maneuvers and that reduces the stress considerably.

But, here’s the thing; to make this approach work, to work with Forex ETFs we have to alter our previous forex habits of fast returns in order to succeed.

We only have to alter that patience habit in order to extract more from the ETF’s than we ever did with the old forex margined trades.

Some things will change with this approach of course. We find that we’ll now have to pay commissions (oh my!). But, understand, that the ‘no commissions’ factor is one of the big lures drawing traders into the highly-margined online forex market. This is what leads to over-trading and eventual complete losses (the average lifetime of a forex traders is measured as 3 to 6-months).

If, on the other hand, we’re willing to pay something to the ‘house’ (the casino called ‘the markets’ – they are in business to make money after all), we’ll gain access to a game we can actually win – the Forex ETF game.

With patience and the skill to detect trend shifts in the market we can far outpace our previous forex ventures in a very short time. YES, THIS ONE WILL WORK FOR US.

MOST CURRENCIES ARE COVERED

You can find ETFs for the major currencies for both the long and the short side of the market these days.

Here are a few examples of the most liquid forex ETFs:

Symbol: UUP. The US DOLLAR is in a roaring bull market at present and can be played from the Long side with UUP as the etf for USD Index.

Symbol: FXE. This is a Long EURO etf.

Symbol: EUO. This is an UltraShort EURO etf.

Symbol: FXA. This is a Long Australian Dollar etf.

These are a just a few examples. More currency etfs can be found from a search on the internet.

Be sure you pick the highest volume etfs when given a choice. You want to be able to keep the spreads low and be able to enter and exit positions with ease. – George