CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 58% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Click here to read full risk warning

Forex Hedging: What is It and How Do You Use It?

Investors of all stripes use hedging as a strategy to protect one position from adverse price movements. Typically, hedging involves the opening of a second position that is likely to have a negative correlation with the primary asset being held, meaning that if the primary asset’s price makes an adverse movement, the second position will experience a complementary and opposite movement that offsets those losses.

In forex trading, investors can use a second pair as a hedge for an existing position they’re reluctant to close out. Although hedging reduces risk at the expense of profits, it can be a valuable tool to protect profits and stave off losses in forex trading.

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Chart Patterns vs Indicators: What's Best for Technical Analysis?

For any trader, a critical step in developing effective trading strategies is choosing an analysis method that evaluates charts and potential trade opportunities.

Chart patterns and indicators offer different approaches to evaluating markets, with each presenting its own relative strengths and weaknesses. Although some trading experts are staunch advocates of one over the other, many traders do use a combination of these methods to create their own customized trading strategy.

Here’s a look at the benefits and drawbacks of each school of thought.

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The Advantages of CFD Trading

Contract-for-difference trading is a popular alternative to traditional investing because of its ability to maximize capital investments and, in turn, increase your potential profits or losses. This approach to forex trading has grown in popularity over the past decade, especially with some brokerage firms offering negative balance protection to limit heavy losses that would put your trading account into debt.

Here’s a look at some of the other key benefits of CFD trading.

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CFDs vs Options Trading: What's the Difference?

Contract trading is popular in many financial marketplaces. As a trader, you can purchase a variety of contract types—and each comes with unique risks and rewards. To choose and execute the right strategy for your goals, it’s important to understand the differences between them.

Below, we’ve outlined the benefits and drawbacks of two popular strategies: CFDs and options trading.

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Breaking Down Bid and Ask Rates

Bid and ask rates play an important role in all types of financial marketplaces. Below, we’ve defined what these two terms mean and how they relate to forex trading.

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6 Common Misconceptions of Forex Traders

As one of the largest global marketplaces, forex attracts a large volume of traders of different backgrounds and experience levels. Naturally, a market this popular also has its own mythology. Below, we’ve debunked the six most common misconceptions of forex traders.

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Common Chart Patterns: A Forex Cheat Sheet

Making money on the forex market—or any other exchange, for that matter—can certainly be tricky. But thanks to a number of chart patterns, you can learn to anticipate price movements and act accordingly. Making money doesn’t have to be impossible.

Unfortunately, with so many different patterns out there, it can be difficult to figure out which ones are best for determining where prices will go in the near future.

To make your job easier, we’ve outlined five of the more helpful continuation and reversal patterns below in a forex cheat sheet. Become familiar with each of them to make better trades.

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3 Risks to Consider Before Trading Currency

The forex market is the largest investment market the world, and there are a number of different ways to trade it—spot transactions, currency swaps, options, foreign exchange swaps, and more. But, as with any kind of trading, there are risks to be wary of when you dip your toes into the game. To help you understand these risks, here are three things to consider before you start forex trading.

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4 Tools to Help You Create a Successful Forex Trading Strategy

Different analytical tools in your trading tool kit can help you locate buy and sell signals, identify and anticipate market trends, and help inform what position you should take. But to create a consistent and effective forex strategy, you need to understand how your chosen indicators can be used as checks and balances in a more comprehensive trading strategy.

The most successful traders are able to manage risks and rewards and see the bigger picture of their trading decisions by populating their tool kit with four types of tools: trend following, trend confirming, overbought and oversold, and profit taking. We’ve outlined why these four roles are essential and how they can complement one another to make you a savvier trader.

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How to Place Trade Stops to Maximize Profit and Minimize Risk

Stop-loss orders are the fail-safes of the trading world and the most common means by which traders balance risk and reward without staying glued to their computer screens 24/7. Like the name suggests, stop-loss orders are meant to limit potential losses by automatically exiting traders from their position in the event that price moves against them. If you were to buy a currency expecting an increase in price (called “taking a long position”), then you would place a stop-loss order to sell and exit your position directly below the current market value. This stop-loss order would only be triggered if the price drops below your stipulated threshold—in short, it will exit you from your position and limit your losses if the price decreases. If you entered into a short position expecting a decrease in price, you would place your stop in the opposite fashion, above the current market value.

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