Bites Of Trading Knowledge For New TOP Traders #15 (short read)Bites Of Trading Knowledge For New TOP Traders #15
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What is an Interest Rate Differential? -
An interest rate differential is a change in the interest rates between the currencies of two countries. It is a measure of how money from two countries compares to each other.
What is the Carry Trade? -
The carry trade is where an investor borrows in a currency where the interest rate is low and converts those funds into a currency where the interest rate is higher.
For example, if one currency has an interest rate of 5% and the other has a rate of 1%, it has a 4% interest rate differential. If you were to buy the currency that pays 5% against one that pays 1%, you would be paid on the difference with daily interest payments.
RISKS AND OPPORTUNITIES FOR CORPORATES AND INDIVIDUAL INVESTORS -
Common application of financial market instruments for managing risk and opportunities.
Diversification: Portfolio Risk Using FX Futures
Portfolio diversification is the process of investing your money in different asset classes and securities in order to minimize the overall risk of the portfolio.
For both corporate and individual investors, having access to markets that enable the building of a diversified portfolio is an important consideration when managing futures focused accounts.
Similar to managing risk, the market to trade would be a key variable to clearly state and support with reasons for trading or investing. Reasons for selecting one market over another could include price volatility, liquidity, daily volume traded, size of the minimum price increment, and value of the minimum price increment. Comparing these variables between markets will help decide the suitability and/or risk of each.
For example, the parameters for a price driven strategy may be designed to be applied to any market whether it be index equity futures or forex futures. However, the signals for entry may not always trigger if a trader were just to focus on a single index equity futures. Having access to markets such as the Micro MSCI USA Index futures could add diversification to a portfolio in an efficient manner.
Having access to other futures markets to apply the strategy to allow for the creation of a diversified portfolio with varying entry and exit points or the ability for more trading oriented investors increased opportunities to execute price driven strategies more often across a range of futures markets.
TRADDICTIV · Research Team
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Disclaimer:
We do not provide investment advice, nor provide any personalized investment recommendations and/or advice in making a decision to trade. Before you start trading, please make sure you have considered your entire financial situation, including financial commitments and you understand that trading is highly speculative and that you could sustain significant losses.
SDX1! trade ideas
USD Cup & Handle BreakoutIt has been a rather long time since I looked at the US Dollar Index Futures chart. Pulled out the chart and surprise!
Since June 2022, the weekly USD chart had actually completed a Cup & Handle pattern, retested the resistance turned support at 105, and now is on a tear rocketing upwards. Technical indicators although stretched for a bit, appear to have renewed momentum, crossing over and upwards in alignment.
The daily chart shows some level of stalling in late August, and pushed further upwards late last week, closing at a multi-year high.
In an inflationary environment, with the Fed bent on continuing to raise rates and accepting painful costs, the USD is likely to rise further. Cup & Handle pattern projections put it above 120. This has many many implications, both as the USD rises, and when the USD is categorically above 110, 115 and 120. This USD move will be the backdrop of many new trends over the next couple of months to years, giving traders and investors many opportunities if handled correctly. Watch for them!
What to do when technical analysis does not appear to be workingI take a look at when the US dollar Index broke below its uptrend back in the middle of August - the break was not sustained. I talk about what I do next when it appears my analysis is not working.
The Society of Technical Analysts' next course starts in October. Those wishing to learn more about technical analysis can take a look at the Route to Diploma - Society of Technical Analysts, www.technicalanalysts.com
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DX1! - Weekly Market Update, 8/22US Dollar Index comes alive with broader market weakness, this could be the catalyst to drive this trade to work out.
If we close this week with continued strength, we can consider raising the stop below that last placed low.
This trade has been supported by the 50 day SMA along with support structures.
US Dollar Ready For The Next Rally!The Dollar Index bounced off the support level from the May 13th high a second
time on August 10th at $105.
Since the start of the year, price has been making a consistent pattern of higher
highs and higher lows, and this most recent pullback appears to be following this
same pattern.
We need to see now that the buyers continue to push price skywards and towards
the recent high from July 14th at $109.
If there is a break and close above that high, it will confirm a continuation of the
current bull trend in play.
Trends should follow a bullish move with the dollar in certain forex pairs that are
influenced by the dollar. This should result in opportunities in this market.
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Double cup and handle U.S dollar blow off?With more rate hikes coming in the future due to inflation still being too hot, this could be a reality. When commodities stop falling in the future with a dollar pushing higher (2023?), that should be a good time to really back up the truck with physical gold and silver #1. #2 Mining stocks in gold, silver, copper, uranium, steel, etc should also be on your radar for deals you never thought you'd get. Tech boom done, next is a Commodity Boom after an all out assault to smash inflation. Good luck everyone.