Forex Investing Strategies
Forex (currency) is a subject that seems complicated to many people. In reality, forex is the same as other investments, if you don’t know much about it, it can be dangerous.
The good news for those looking for a forex strategy is that there are more than enough strategies for every investment horizon. Whether you are a long-term investor or someone who watches the market at all times looking for opportunities, as long as you are curious about forex strategies, you will find a strategy that suits you.
Follow the daily or weekly trends
A simple forex strategy is to follow the daily or weekly trends. Use the prices and charts to spot trends that seem well-founded and jump on them. A warning for this way of trading is that your trades may seem very small in relation to the prices, but in fact they could be hundreds of pips. This means you need to trade small. Be conservative in your allocation when you buy and allow your position to develop. Set a reasonable stop and plan a target. Beginners find this a simple strategy because you don’t have to constantly monitor the market, they can trade when they have time.
Carry trade
Carry trading is a method in which you buy and hold a currency that pays a high interest rate against a currency that has a low interest rate. You receive a daily rollover for the interest rate difference between the two currencies. The advantage of carry trading is that you receive income daily, even when your positions are not fluctuating. In addition, since most forex investments involve leverage, you get paid on the size of your trade, not the size of your capital.
The disadvantage of carry trading is that the interest rate differentials are often not that big compared to the risk you are taking. Furthermore, the currencies that are most suitable for carry trading are usually the currencies that react the most strongly to bad news about the global markets. In other words: as long as the economy is doing well, these currencies will continue to rise and pay out, but if things (unexpectedly) get worse, they will dive hard and fast. If your leverage ratio is too high, your account can quickly become a lot smaller.
Day trading
The Forex market is always moving. 24 hours a day, 7 days a week. Although the most active trading moments in Forex are quite specific times, the market always makes small movements. Depending on what you want to invest in, you can choose the best moment. Most day trading strategies are based on technical analysis, which has its advantages. Since the Forex market is very technical, you can profit from this with a sharp eye and a good plan.
Fundamental trading
Some investors take a more old-fashioned approach to their investments. They prefer to invest in something they understand rather than signals that charts and prices give. For this cautious investor, fundamental forex trading is best suited.
Fundamental trading is following the news in different countries and investing in the countries with strong economic trends compared to the others. This approach is quite simple as it focuses on the long term. The tricky part is learning to understand the economic reports and comparing them to other countries.