Wed 22 Mar 2006
Now, lets think about long and short term strategies on FOREX.
Let’s suppose You know for shure that US dollar will gain 10% until end of the year compare to Euro. How you could know it ? Macroeconomical factors could be first part, and political situation in Europe could be second one, for instance.
Knowing all of that, why can’t you just invest 100 USD, and taking into account margin of 200:1 - cash out at the end of the year very pretty amount of 2000 USD pure profit (2000%) ????
The answer, again, behind the nature of Forex Marginal Trading.
If, during the course of the day, cross rates swings just only on 0.5% in a wrong direction, your Forex Account ballance will be zero and all your positions will be closed. To be on a safe side I would advise to have at least money for covering 2-5% swings in daily cross rates. Which lead us from marvelous 2000% calculated above to just mere 100-200% .
You will say - 100% per year is already very nice. Yeap. But you will lose your sleep during this year for shure. And remember where we started? We knew for shure that US dollar will gain compare to Euro 10 % in the course of the year.
But what if you missed something in your prognoses ???