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Forex Market Day Trading for the Simple Investor
Submitted By: SB Wise Date: July 13, 2010, 03:28:12 PM Views: 1769
Summary: Understanding the forex market is important to day trading success. Given the vast amounts of money that move in the foreign currency markets it only makes sense that currency movements have a major impact on stock prices. Day trading

Understanding the forex market is important to day trading success. Given the vast amounts of money that move in the foreign currency markets it only makes sense that currency movements have a major impact on stock prices. Day trading on any exchange successfully therefore requires at least a rudimentary understanding of how the forex market impacts asset prices.

How the USD Forex Market Impacts the S&P 500
It has long been established that the USD forex market has an inverse relationship with the S&P 500.  Investors ignore this high correlation at their own peril.  An inverse relationship implies that as the USD grows stronger against other major global currencies the S&P 500 falls.  Conversely the reverse is typically also true, that as the US Dollar falls, the major American stock market indices will rise.

Taking Advantage of Tight Relationships Has Become Easier for Retail Investors
One of the great advantages of having some knowledge about the nature of money and stock prices is the ability to use that knowledge to make money trading online. In the past the ability to take advantage of small differences in stock prices was limited to people with large amounts of capital and teams of traders ana analysts at their disposal.  Not so anymore.  The invention of options, ETFs, and mini-forex accounts has opened the door to a much smaller capitalized investor.  Traders with even a modest $100.00 can take advantage of small inequalities an still generate profits justifying the effort.

How the Modern Small Capital Investor Trades Profitably
One of the ways smaller traders invest profitably is by taking advantage of tiny option contracts called binary options.  The fascinating thing about these securities is that there is no transaction costs (allowing no-cost trading) and extremely high fixed yields - ranging from 58-80% on most contracts.  This allows a trader with a few dollars to take advantage of small swings in price and still earn yields comparable to highly leveraged forex market traders.

Many retail traders are turning to binary options as a way to compete in the ever faster trading happening in the forex market. Traders who pay careful attention to forex market trading activity can frequently take advantage of known currency / stock market relationships.

Steve B. Wise

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