Page 134 - Ultimate Guide to Currency Trading

done so by raising interest rates. Secondly, there is an expectation by some of the larger currency
brokers that a normalization of monetary policy (after the 2008-2009 banking crisis) will take place;
and thirdly, the Czech Republic is entering a deficit-reduction regime. All three of these factors add up
to make a short EUR/long CZK trade to be very promising in the future.

If you are considering entering into long positions in any one of the developing nation's
currencies, it would be best to consult your broker's reports for an indication as to price levels for
entry. Developing nation FX trades tend to be longer term in nature, therefore waiting until the proper
price point for a long exposure should not be a problem, as you should be in no rush to build a CZK
position.

Gold and Silver and Your Currency Portfolio

You should also consider adding some gold and silver to your high risk/ reward portfolio. Gold and
silver are priced in USD and are traded in uniform amounts all over the world. Additionally, most FX
brokerage accounts allow you to go long and short for spot gold and silver on the same platform and
with the same software as normal Forex trades. If you are considering trading gold and silver, then
electronic-spot trading can bridge the gap between futures and physical metal.

The lots that are traded are usually 100 ounces for gold and 1,000 ounces for silver. With
these size lots, the profit from trading gold and silver like a currency can be huge. Gold can go up
nearly 1 to 3 percent per day against the USD, and it is common for silver to go up 3-5 percent against
the USD on the days gold moves up. If you add to your overall FX portfolio a long or short Gold/USD
and long or short Silver/USD exposure, you can open your-self up to very large price movements.

For example, it is possible to go long 20 percent of your available port-folio in a long
Silver/USD position and triple the size of your account during a strong run on the white metal. It is
quite common for silver to go up over 100 percent in a year. This would equate to a 5,000 percent
return on the actual dollars you have invested in a silver trade at 50:1! If you had a $10,000 account,
and you set your leverage to 50:1, and you put 20 percent of that margin in a Silver/USD trade, you
would have over $200,000 in your account at the end of the year. This can be shown by:

$10,000 x 20% = $2,000 x 50 = $100,000 x 2 (100% growth) = $200,000

Some currency brokers offer gold and silver spot trading, but your leverage is set at
20:1 or 50:1; it will automatically switch to a 1:1 leverage when you enter into a long
ALERT or short, gold or silver spot trade. Check with your FX broker before you enter into
these trades as they will skew your profit calculations!

A long Gold/USD position can act the same way as a long AUD/USD position. It can capture the
movement of a strong AUD, but at the same time a long gold position can act as a safe-haven play
right along with a long Swiss franc and a short Swedish krona play. In fact, a long gold position has