Page 135 - Ultimate Guide to Currency Trading

become one of the most sought-after hedges in the currency markets as gold has taken a front seat in
traders and investors' eyes.

This front seat for gold has been due to several reasons, one of them being added risk
aversion and added money supply in the United States and Europe. Only time will tell if gold and silver
continue to have a glitter and a gilt, and only time will tell if they continue to have record price levels
and record returns. In the meantime, a long Gold/USD and long Silver/USD position can be treated like
an FX trade in your currency-brokerage account. This is for a reason! Gold and silver are currently
being reconsidered as alternatives to the paper-based fiat currencies of the world. Central banks from
around the world including Russia, Europe, and the United States hold gold in their vaults as a hedge
against their paper-backed currency holdings. Look on some of the central bank websites for an
indication as to how much gold they own, and at what percentage.

One of the world's best managed central banks is the Swiss National Bank (www.snb.ch). A
search through its website will reveal that it has CHF 270 billion in assets; nearly CHF 50 billion of this
is in gold reserves while CHF 200 billion is in foreign exchange reserves, a 1:5 ratio. In mid-2011 South
Korea increased its gold reserves by 25 tons, worth about USD 1.25 billion. The purchase represented
a nearly 1,700 percent increase in its gold holdings. These facts can serve as the basis of a plan to keep
gold and silver in mind when considering an actively managed, aggressive high risk/reward currency
portfolio

Building Up Confidence

When you are just starting out with your trading, you might wean yourself off looking at the FX
markets from a distance onto trading in a demonstration account. After you feel comfortable with
trading in the demonstration account, you will most likely begin trading in a live account. Once you get
to trading in a live account, you will begin to feel an altogether different emotion than when you were
trading in the practice account.

There is nothing like having a few bucks in your account and getting down to some real
FX trading. Having real money to trade with can make you feel alive inside. You might
find yourself even walking around with a spring in your step as you know that you are
matching wits with the Forex traders of the world.

In order to work in the style of a high risk/reward trader, you will need to develop the
confidence required to engage in risky trades. Since dealing with actual money, as opposed the play
money of a practice account, is the best way to develop confidence, your real nerve will develop after
you have traded with actual real cash.

While it is true that you have to trade with actual real cash, it is not required that you trade
with large amounts of actual money to learn how to handle the process of entering in the trades