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Forex
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Stocks
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| Average Notional Volume Traded
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$1.9 Trillion Daily
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$60 Billion Daily
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| Commission-Free Trading |
Yes
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No
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| Short-Selling on a Downward
Move |
Yes
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No (Uptick selling restrictions)
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| 24-Hour Market Liquidity
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Yes
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Limited Products
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| Elimination of Middlemen |
Yes
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No
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| Up to 200:1 Leverage
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Yes
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No
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| No Slippage on Client Orders
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Yes
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No
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The SNB also closely
monitors exchange rates, as excessive strength in the Swiss franc can
cause inflationary conditions. This is especially true in environments of
global risk aversion, as capital flows into Switzerland increases
significantly during those times. As a result, the SNB typically favors a
weak franc, and is not hesitant to use intervention as liquidity tool. SNB
officials intervene in the franc using a variety of methods including
verbal remarks on liquidity, money supply and the currency.
The EUR/CHF is the most commonly traded currency for traders who want to
participate in CHF movements. The USD/CHF has higher illiquidity and
volatility. However, day traders may tend to favor USD/CHF over EUR/CHF
because of its volatile movements. In actuality, the USD/CHF is only a
synthetic currency derived from EUR/USD and EUR/CHF. Market makers or
professional traders tend to use those pairs as leading indicators for
trading USD/CHF or to price the current USD/CHF level when the currency
pair is illiquid. Theoretically, the USD/CHF rate should be exactly equal
to EUR/CHF divided by EUR/USD
But even
considering the great amount of indicators available, there are still many
traders every week who still end up buying (being "long") while the
currency pair is in a basic downtrend, or selling short when a market is
in a uptrend. This is, they end doing things backwards.
If you want to become a profitable forex trader you will need
to use as many technical indicators as you want, or create a personalized
trading strategy based off a combination of indicators, to recognize the
trend. In other words, professional Forex traders try to identify the
major trend, the intermediate trend, and the short-term trend and then
construct their trades in that direction, based on how long their rules
allow them to hold a position.
If the action of the market shows your judgment to be correct, the
successful trader 'stays with the market' and endeavors to make the
maximum profit on each trade, according to his/her risk-to-reward / equity
management rules. If and when the market goes against him/her, the smart
trader will take profits and get out. In a narrow market, when prices are
not going anywhere to speak of, but move within a narrow range, there is
no sense in trying to anticipate when the next BIG movement is going to be
- up or down.
In short, if you want to be in good profitable terms with the forex
markets you must follow this words of wisdom: “Never argue with the
market, or ask it for reasons or explanations”.
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