Continue reading...A brief look at the different ways in which an FX trader can diversify within their account.
While there are an unlimited number of publications covering the advantages of portfolio diversification, few of them explore the possibilities of trading Forex along with typical stock, bond and real estate investments. It is even more rare to find theory on diversifying within a FX portfolio. Although fund managers are very aware of the importance of diversity, speculators often overlook its value. As we have all come to realize, you can?t expect consistent success by being a conformist.
As all currency traders know, the Forex market is a great way to hedge the economic risk of a pool of investments. Studies have even suggested that the Efficient Frontier?s optimal portfolio is actually shifted outward by including commodities. Meaning that for each additional unit of risk a higher return is attainable.
Because markets are often driven by human emotion and unforeseen events, it is...
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