Foreign Currency Trading

Written by BK Shaw
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Market liquidity is an important factor when considering how best to execute foreign currency trading strategies. Some currency markets in the options futures markets can be a little illiquid. Remember liquidity is created by lots of buyers and sellers in a marketplace. If lots of people want to buy and sell, there will be lots of opportunities to get in and out of positions at fair market value.

If you are foreign currency trading in an illiquid market, you might find yourself getting what you might consider to be unfair prices. You have to be careful about what kind of order you place for getting out of an illiquid market. If you take the market price and buyers are hard to find, you are at the mercy of the one or two willing buyers, and if they bid a price below market value and you agreed to take the first offer, you will feel short changed.

I have had difficulties getting out of a market before when foreign currency trading. It can be nerve wracking because you wonder which will happen first. You wonder if you will get a buyer before the market tanks, and the dilemma is whether or not to drop your price. Of course if the market rallies, the problem is solved!

Enjoying Foreign Currency Trading

Work with a broker you like. Remember you're trading to make money and you're also trading to have fun. Unfortunately trading is a little bit like the general workplace: it's only really fun when you're making money. I think a good tip is to only play with money you can afford to lose, and then the outcome doesn't matter as much!


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