This article is taken from the Forex Journal, a special edition by Trader’s Journal magazine in Nov 2007.
The author is Boris Schlossberg, who is the Senior Currency Strategist for Dailyfx.com. He is the co-author of Amazon’s #1 investing book Millionaire Traders – How Every Day People Beat Wall Street at its Own Game
- Boris Schlossberg shows how to exploit the ‘stop hunters’ in the Forex markets using a simple, mechanical method that only requires a price chart and one indicator
Foreign exchange is the most leveraged financial market in the world. In equities, standard margin is set at 2 to 1, which means that a trader must put up at least $50 cash to control $100 worth of stock. In options, the leverage increases to 10 to 1 with $10 controlling $100. In the futures markets, the leverage factor is increased to 20 to 1. For example, in a Dow Jones futures e-mini contract, a trader only needs $2,500 to control $50,000 worth of the index.
However, none of these markets approach the borrowing intensity of the Forex market where the default leverage at most dealers is set at 100 to 1 and can to as high as 200 to 1. This ratio means that a mere $50 in trading capital can control up to $10,000 worth of a currency.
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Other related articles:
- FX Markets get even more Attractive By Darrell Jobman
- How to Trade Forex using Fibonacci Price Relationships by Carolyn Boroden
- 3 Peaks and a Domed House by Larry Pesavento
- Three Steps To Short-Term Trading Success by Toni Turner
- Price and Time by Andy Bushak
- Using Non-Time Based Charts for Short-Term Forex Trading by Dr. John Clayburg
- Trading for Revenge: Control It or It Will Control You by Dr. Doug Hirschhorn
- How to Swim the Forex Ocean… and not get Eaten by Sharks by Kevin Davey
- Critical Forex Trader Decisions by Daniel Gramza
- Ranking Forex Markets by Ron Schelling
- The Globalization of Currency Trading by Dar Wong
- What You Don’t Know Can Hurt You by Ed Ponsi
- The Foreign Exchange Market by Peter Pontikis
