How you can turn R500 into R1,405 trading forex
In just a few hours turn R500 into R1,405
Discover the different instruments using gearing
Why I like CFD's to harness the power of gearing
The Forex Trader Team, recently sent out this trade to our Forex Trader subscribers: We told them to sell (go short) the Great British Pound to the Australian Dollar at $2.0288 and put their take profit level at 1.9920. Traders could have entered this trade with a mere R500. And in just a few hours, turned that R500 into an easy R1,405. Read on to discover how…
What if I told you that with a starting R500 per Forex trade, you can be exposed to R50,000 worth of currencies?
With gearing you can grow your money faster with Forex.
Take a house for example. When you buy a house, you don’t pay the full R1,500,000 in one go. You pay a small fee, maybe R10,000 a month, and you’ll gain the luxuries of living in a R1,500,000 house every month.
With Forex it’s the same. With just R500, you can be exposed to R50,000 worth of currencies.
How is it possible to invest R500 and end up with R1,405 in just three hours?
So what are the different instruments that offer gearing?
When you trade with gearing, you’ll always buy the derivative of the product.
Here are three of the most popular (derivative) instruments you can use to trade with gearing.
Trading Instrument #1: Futures
A future is a contractual obligation in which one party undertakes to sell a standardised quantity of an asset for delivery at a predetermined future date and price, and the other party agrees to buy the asset on the same terms.
With futures you’ll be able to buy the underlying currencies or shares and be exposed to more than what you put in.
Trading Instrument #2: Options
An option represents a contract sold by one party to another party.
The contract offers the buyer the right, but not the obligation to buy (call) to sell (put) a security or other financial instrument.
Trading Instrument #3: Contracts for difference (CFDs)
CFDs are the most popular products available to the private investor.
Basically a CFD is a contract whose value depends on (or derives from) the value of an underlying asset such as a share, index or commodity.
Here’s why I like to use CFDs to harness the power of gearing.
The problem with options and single stock futures is that they’re pretty much obsolete in the trading world, and I like to be ahead of the times when I make money trading.
Here are my reasons why I trade CFDs more than the others…
Reason #1: I don’t need to worry about my contract expiring where I need to pay another brokerage leg, like I do with futures.
Reason #2: I don’t have to worry about the value of my instruments devaluing (where it will cost more) like I do with options.
Reason #3: I’ll be able to manage my risk by buying as many CFDs as I want, rather than with futures where I have to buy a set of an instrument.
That my friend, is the power of gearing.
“Wisdom yields Wealth”
Analyst, Red Hot Storm Trader