A form of arbitrage that involves switching from a domestic currency that carries a lower interest rate to a foreign currency that offers a higher rate of interest on deposits. There is a foreign exchange risk implicit in this transaction since the investor or speculator will need to convert the foreign currency deposit proceeds back into the domestic currency some time in the future. In other words if your chosen currency goes down in value against your domestic currency more than the positive interest rate difference you could lose. The term “uncovered” in this arbitrage refers to the fact that this foreign exchange risk is not covered through a forward or futures contract.

I hope the above currency trading article was of help to you.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

If you invest in currencies, it is likely that you have heard of the term carry trade. This strategy has generated positive average returns since the 1980s, but only in the past decade has it become popular amongst individual investors and traders.

What Is The Carry Trade?
Mechanically, putting on a carry trade involves nothing more than buying a high yielding currency and funding it with a low yielding currency, similar to the adage “buy low, sell high.”

The most popular carry trades involve buying currency pairs like the Australian dollar/Japanese yen and New Zealand dollar/Japanese yen because the interest rate spreads of these currencies pairs are very high. The first step in putting together a carry trade is to find out which currency offers a high yield and which one offers a low yield.

One needs to be careful; if your chosen currency goes down in value against your low interest yielding currency more than the positive interest rate difference you could lose.

To read the full article by Kathy Lien go to Investopedia.com .

I hope the above currency trading article was of help to you.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

A transferable futures contract that specifies the price at which a currency can be bought or sold at a future date. Currency future contracts allow investors to hedge against foreign currency exchange risk.

To read more about Currency Futures Contracts go to Investopedia.com .

I hope the above currency trading article was of help to you.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.

Forex: The Moving Average MACD Combo
In theory, trend trading is easy. All you need to do is keep on buying when you see the price rising higher and keep on selling when you see it breaking lower. In practice, however, it is far more difficult to do this successfully. The greatest fear for trend traders is getting into a trend too late, that is, at the point of exhaustion. Yet despite these difficulties, trend trading is probably one of the most popular styles of trading because when a trend develops, whether on a short-term or long-term basis, it can last for hours, days and even months.

Longer term Momentum Trend Trading, some of it which is discussed in this blog post, is the best system I at TradeCurrencyNow.com highly endorse and recommend for Forex Traders.

Overview
The MACD combo strategy involves using two sets of moving averages (MA) for the setup:

50 simple moving average (SMA) – the signal line that triggers the trades
100 SMA – gives a clear trend signal
The actual time period of the SMA depends on the chart that you use, but this strategy works best on hourly and daily charts. The main premise of the strategy is to buy or sell only when the price crosses the moving averages in the direction of the trend. (To learn more, read the Moving Averages tutorial.)

Rules for a Long Trade
Wait for the currency to trade above both the 50 SMA and 100 SMA.
Once the price has broken above the closest SMA by 10 pips or more, enter long if MACD has crossed to positive within the last five bars, otherwise wait for the next MACD signal.
Set the initial stop at a five-bar low from the entry.
Exit half of the position at two times risk; move the stop to breakeven.
Exit the second half when the price breaks below the 50 SMA by 10 pips.
Rules for a Short Trade
Wait for the currency to trade below both the 50 SMA and 100 SMA.

Once the price has broken below the closest SMA by 10 pips or more, enter short if MACD has crossed to negative within the last five bars; otherwise, wait for the next MACD signal.
Set the initial stop at a five-bar high from entry.
Exit half of the position at two times risk; move the stop to break even.
Exit the remaining position when the price breaks back above the 50 SMA by 10 pips. Do not take the trade if the price is simply trading between the 50 SMA and 100 SMA.
Long Trades

Conclusion
The moving average MACD combo strategy can help you get in on a trend at the most profitable time. However, traders implementing this strategy should make sure they do so only on currency pairs that typically trend. This strategy works particularly well on the majors. Traders should also check the strength of the breakdown below the moving average at the point of entry. In the failed trade shown in Figure 6, had we looked at the average directional index (ADX) at that time, we would have seen that the ADX was very low, indicating that the breakdown probably did not generate enough momentum to continue the move.

To read the full article with charts and trading examples by Kathy Lien and Boris Schlossberg go to Investopedia.com .

I hope the above currency trading article was of help to you.

Anthony DiChi at TradeCurrencyNow,
America’s Forex News and currency information source.