Comparing CFD Trading and Spread Betting

The core difference between CFD trading and spread betting is in taxation. While in CFD trading traders pay capital gains tax (CGT), spread betting is free from CGT. CFDs are available globally, while spread betting is only available in Ireland or the UK. The spread...
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Major Benefits Of Contracts For Differences

The trading market is vast and diverse. This has given traders a variety of ways and options to trade. Contracts for differences (CFDs) are a unique trading option. It allows traders to trade using leverage to gain profit on underlying assets. Traders can trade in...
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Who Really Controls the Forex Market?

Ever wondered what moves the forex market? What factors affect the forex market? What forex market moves the most? What is the best time to trade on forex? Then, you are in the right place. Here, you will understand a critical mistake you could be...
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All about Forex Oscillators

Oscillators are technical analysis tools used in the construction of low and high bands between two extreme values. This tool then creates trend indicators that oscillate within the bounds. Forex traders use trend indicators to identify short-term oversold or overbought conditions. As such, oscillators can...
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Bollinger Bands Explained

Today, forex trade is among the most lucrative trading markets in the world. Traders exploit fluctuation in currency exchange rates by selling or buying the currency to make a profit. Bollinger bands enable forex traders to enter or exit market positions by identifying points when...
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The Advantages of Copy Trading

Copy trading is becoming common among forex investors, considering the high rate that investors are absorbing it. It is a trend that is enabling active market investors to replicate another trader’s actions. Copy trading is possible in a social exchange network where investors can copy...
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Rate of Change Forex Trading Strategy

One of the most popular technical trading indicators among more experienced forex traders is the momentum oscillator. Traders can forecast the potential price changes in the market before they occur by using the leading oscillating indicator. One great representation of the momentum oscillator is the rate of change (ROC) indicator that measures the changing speed of the price within a defined timeframe. The indicator calculates the change of percentage between the current price and a few periods back registered as “n.” It forms an oscillator that fluctuates as the rate of change above and below the zero lines. Traders also use the ROC to detect divergences, confirm price moves, centerline crossovers, and as a guide to determine overbought and oversold situations. However, it is essential to note that trading with the oscillator solely on its own will give you unreliable and, most likely false signals. If you want more reliability and signals that you can trust, use the momentum oscillator with other technical trading indicators. The oscillator setting used in technical analysis of price movements in the market is against midpoint zero-level. When the ROC rises above zero, it is a confirmation of an uptrend. If it falls below zero, that is an indication of a downtrend. If the ROC hovers near the zero point, it is an indication that the price is consolidating. It is very crucial for traders using the ROC oscillator to watch the price trend keenly because the ROC provides minimal insights except for consolidation confirmation. ROC Calculation • Picking the value of the “n” in the ROC calculation is the first primary step. The value chosen varies from one trader to the next, with short-term traders preferring a small value that could be as low as 9, while long-term traders prefer larger values that could go up to 200. • The “n” value represents the many periods ago compared with the current price. While smaller “n” values react faster to market price changes, they also provide a more significant number of false signals. • On the other hand, larger “n” values react much more slowly, but they give more meaningful and trustworthy signals. The steps to calculating ROC are as follows. • Make a selection of the n value, which can be any number such as 12, 25, or 200. If you are a short-term forex trader, choose a small value and a larger one if you are a long-term investor. • Track down the latest and updated closing price • Track down the n periods ago for the close price of that timeframe • Attach steps two and three prices into the formula • With the close of each period, make a new calculation of the ROC value ROC Formula ROC = [(P – PN) / PN] x 100 P = Closing Price N = Number of periods ago Rate of Change (ROC) Pros and Cons Pros • It is ideal for currency trending market situations • When used in conjunction with trading indicators, it gains more strength at identifying strong momentum • It helps to identify an overbought and oversold situation on a moving price chart • It helps to detect divergences Cons • It is not the best indicator to use to identify cycle turns as it can give many false signals • If you are looking for the best price action analysis, this indicator tool will not provide you with all the necessary data needed unless you use it in conjunction with other technical indicator tools • It is not the most straightforward indicator to use, especially for new forex traders • If not used correctly, it can produce several whipsaws • It gives equal weight to the price of several periods ago and the current price, which should not be the case. Future price movement should depend more on the current price than on a few periods ago. Wrapping it up Momentum oscillators are best suited for flat trends or during trading ranges. However, they also come in handy when it comes to identifying the direction an underlying trend takes, like the rate of change trading tool. Moreover, it measures the price changing speed with an upward surge and downward plunge that is good enough to provide traders with enough knowledge on the action to take. Like many other technical trading indicators, the rate of change is not reliable on its own, but it is more robust when used in conjunction with other technical analysis tools.
One of the most popular technical trading indicators among more experienced forex traders is the momentum oscillator. Traders can forecast the potential price changes in the market before they occur by using the leading oscillating indicator. One great representation of the momentum oscillator is the...
Read More

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