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Speculative currency trading is a high-risk/high-return game. Currency investing diversifies this risk by taking many different positions in many different exchange rates. The risk/return characteristics of currencies are different from other asset classes and among individual exchange rates.

The volatility of major currency pairs, such as EUR/USD, is typically less over the course of a year than the volatility of the S&P 500 Index. The problem is that investors look at short-term volatility and use that as a general measure of risk. That won’t work for currencies as an asset class.

If all forex participants were speculative traders, the story would be different. But they’re not. The majority of forex trades are made not to bid up prices but to cover outstanding positions and otherwise maintain stability.

Positions are taken based on many different perceptions of the market—using strategies that include technical analysis, economic indicators, interest-rate differentials (the “carry trade”), and derivative plays based on emerging as well as major currencies. This multiplicity of “currency views” enhances the natural diversification effect of currency investing.

In the short term, there may be no easily defined relationship between risk and return in forex. Over longer periods, however, valuation trends are slow to change, and it is possible to take advantage of established flows. Read more


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VIDEO: MONTHLY WEBINAR: Exploring the Coast Line of Foreign Exchange Land - Part I - Gonçalo Moreira
VIDEO: MONTHLY WEBINAR: Exploring the Coast Line of Foreign Exchange Land - Part II - Gonçalo Moreira
VIDEO: MONEY MANAGEMENT - Why your money management sucks and what to do about it! - Dirk du Toit











Editors’ Picks

EUR/USD remains under pressure above the mid-1.0800s, Fed rate decision eyed

EUR/USD remains under pressure above the mid-1.0800s, Fed rate decision eyed

The EUR/USD pair edges lower to multi-day lows around 1.0870 on the firmer US Dollar during the early Asian session on Tuesday. The Federal Reserve monetary policy meeting on Wednesday will be in the spotlight, with no change in rates expected. 

EUR/USD News

GBP/USD attracts some sellers below the mid-1.2700s, all eyes on Fed, BoE rate decision

GBP/USD attracts some sellers below the mid-1.2700s, all eyes on Fed, BoE rate decision

The GBP/USD pair remains under some selling pressure during the early Asian session on Tuesday. The uptick in the US Dollar above 103.50 and higher US yields provide some support to the major pair. Markets turn cautious ahead of the central bank meetings, including the Federal Reserve and Bank of England interest rate decisions.

GBP/USD News

USD/JPY holds gains below 150.00 on the expected BoJ rate hike

USD/JPY holds gains below 150.00 on the expected BoJ rate hike

USD/JPY holds gains below 150.00, as the Japanese Yen stays vulnerable amid a classic 'sell the fact' trading on the hawkish BoJ decision. The BoJ lifted the interest rate by 10 basis points (bps) from -0.1% to 0% for the first time since 2007 and abandoned the YCC framework. 

USD/JPY News

Editors’ Picks

AUD/USD stays directed toward 0.6500 as RBA's Bullock speaks

AUD/USD stays directed toward 0.6500 as RBA's Bullock speaks

AUD/USD is extending losses toward 0.6500 in Asian trading on Tuesday. The Aussie Dollar remains offered after the Reserve Bank of Australia extended the pause. Markets digest the less hawkish policy statement while Governor Bullock's press conference gets underway. 

AUD/USD News

USD/JPY holds gains below 150.00 on the expected BoJ rate hike

USD/JPY holds gains below 150.00 on the expected BoJ rate hike

USD/JPY holds gains below 150.00, as the Japanese Yen stays vulnerable amid a classic 'sell the fact' trading on the hawkish BoJ decision. The BoJ lifted the interest rate by 10 basis points (bps) from -0.1% to 0% for the first time since 2007 and abandoned the YCC framework. 

USD/JPY News

Gold price flat-lines above one-week low, awaits the crucial Fed decision on Wednesday

Gold price flat-lines above one-week low, awaits the crucial Fed decision on Wednesday

Gold price oscillates in a range and is influenced by a combination of diverging forces. Hawkish Fed expectations, elevated US bond yields and a bullish USD cap the upside. Geopolitical risks lend some support to the XAU/USD ahead of the key FOMC meeting.

Gold News

Bitcoin price shows weakness, but new BTC whales have created solid support at $56,400

Bitcoin price shows weakness, but new BTC whales have created solid support at $56,400

Bitcoin price downside momentum continues to gain strength, giving sidelined and late bulls a chance to buy the dip. The market remains focussed on the oncoming halving, expected to kick off the next bull cycle. For the meantime, however, spot BTC ETFs remain the main play in the market. 

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Lots of tension ahead of this week's Fed decision

Lots of tension ahead of this week's Fed decision

Last week, we got a strong round of US economic data accompanied by hotter US inflation reads. The takeaway of course is that there might be a lot more pressure on the Fed to be looking to scale back its rate cut outlook at this week’s meeting.

Read more

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