Forex – Top Trading Strategies

Year on year forex trading is increasing in popularity. 24-hour trading times and easy accessibility have made it a profitable avenue for many investors. However, it isn’t as simple as just signing up with a broker and immediately finding success. You need to address forex trading with a plan in order to be profitable, the following looks at the top trading strategies you might want to consider adopting next time you decide to trade forex.

Hedging

Considered one of the leading trading strategies for those who want to get involved in forex, but don’t want to expose themselves to excessive risk. Many traders choose to hedge in order to spread their capital and maximise profit potential. For example, if you have US based shares within your portfolio, but don’t want to be left exposed to US dollar movements, then you could hedge against such movements to reduce risk. There is plenty of hedging specific trading strategies around, so if you want to even the keel of your portfolio it may be worth considering.

Speculating

They say that in forex you need to speculate in order to accumulate, and such is definitely a strategy that you can choose to adopt. Speculating refers to several activities that you can undertake in order to generate a profit. It largely involves buying and selling currencies based upon predictions that surround its future performance. How these predictions are generated and the reliability of the information backing it is hotly debated. A trading strategy based solely on speculation can definitely be considered high risk/high reward.

Arbitrage

It doesn’t rank as one of the more popular forex trading strategies, but there is no doubting its effectiveness if it is done properly. Arbitrage trading requires you to both buy and sell currencies simultaneously at slightly varied prices, and do so in a chop and change fashion in order to generate a small profit. When it comes to arbitrage trading speed is key should you want to generate a quick and relatively low risk profit. The issue with arbitrage trading is that the chance to do it is rare, so you must be patient and be ready to strike when the iron is hot.

 Carry

Carry trading is something you have probably heard about before. It involves selling the currency of a country that is seeing its interest rates drops and using the money to buy currency of country that is seeing its interest rates rise. Even though not a commonly invoked forex trading strategy, as at times of high market volatility it can be highly risky, it isn’t one that you should immediately discount.

Macro-Level

Much like carry trading you won’t hear people discuss macro-level trading very often. This is because it is a mixed bag in many regards, pulling from several of different strategy elements. From employment to economic stability, you can expect to use a whole of host of different factors in your decision making should you opt for a macro-level forex trading strategy. It will involve taking on a huge amount of information at any one time, which is simply too much for many traders, but if you love statistics then a macro-level trading strategy could be right for you.

Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment.

 

Alexander Bowring is a London based writer and a Southampton Solent University Screenwriting graduate. He has worked alongside TV personality and Telegraph feature writer Alison Cork, whilst also having produced content for ITV, This Morning, Canvas8, Who’s Jack, Alison at Home, and Bonallack & Bishop Solicitors. Alexander also has a keen interest in investments.

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