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Currency Futures — Pro And Contra Part 1

It is not that much simple to explain, why currency speculators prefer FOREX to the stock exchange market. After all at each variant has its the pluses and minuses.

Traders of the stock markets frequently with the big bewilderment look at the colleagues on the gamble, the chosen battlefield market FOREX. Arguments for benefit of use of futures contracts are simple: the financial result at short-term trade in the future practically doesn’t differ from achievements on a foreign exchange spot market if transactions are made during the same instants. Thus at trade derivatives it is possible to get access to much greater number of financial tools in comparison with operations in the exchange market. Accordingly, having possibility to trade a wide range of products, it is possible to provide a diversification of a speculative portfolio, what is not so simply to make in forex market.

All it is true, but only partly. As against these noteworthy arguments for benefit of futures trading there are counterarguments. They concern possibility to allocate risks, trading various assets. In a reality to achieve the diversification is frequently the illusive idea. Anyway, with reference to the ordinary speculators aimed at fast extraction of profit and not assuming to hold long-term strategic positions. This category of investors develops the trading decisions, as a rule, leaning against results of the technical analysis. Therefore, whatever assets were considered as the tool for gamble, approximately the identical template of estimation of the market almost always will be used. It is caused by considerable influence on our consciousness of the psychological models generated earlier.

As a result, without dependence from number of assets used for trade, in each case we will have almost identical frequency of successful and unsuccessful transactions. So the special sense in expansion of a spectrum of tools isn’t present. To struggle with this it is possible by focusing on small number of assets. Traders feel it, therefore considerable of them “are not sprayed” on an extensive landscape of the market and they specialize on a small circle of tools.

The reason of an inefficiency of attempts of a diversification is connected and with that on short intervals of time there are strong correlation communications between assets which fundamentally aren’t connected in any way that is why they have low correlation with each other. Owing to these circumstances rather often turns of the market is important in the short-term period, arise almost simultaneously. Accordingly, availability of positions which are created proceeding from the same sight at the market, leads to the following. The trading account behaves approximately the same as if trade was led with one-two assets, instead of with their set.

The conclusion from all it is obvious: narrow specialization of short-term speculators it is faster the blessing, than a lack. And these traders need such conditions of trade which are most comfortable for execution of short-term transactions. This condition gives up as a bad job attempts of supporters of future trade to involve in it traders of forex market.

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