An Overview of FX Trading Strategies

FX trading is a game of intelligent traders with strong knowledge of the market. Over the years, numerous FX trading strategies have been conceptualized, used and tested by trading professionals worldwide. While some strategies rely on the technical use of charts and others on the fundamental understanding of the market. Every single strategy is different from others in terms of the level of complexity and contexts of usage. This article outlines a few of most commonly used FX trading strategies.

Strategies to Comprehend FX Market

Carry trade, an FX trading strategy, differs from other strategies in the way it functions whereas trading the news allows traders make uniformed trading decisions in the highly volatile market. Both strategies have been instrumental for experienced and novice traders. Trading the majors for a given time interval is a strategy based on predictions of technical and fundamental trading aspects. Another widely used strategy is trading the market sentiment, which is the momentum of the market and the collective opinion of all traders.

Analytical Strategies to Make Profits

Arbitrage is a speculation strategy used to make profits from price variations of the same instruments either on the similar or the different markets. To comprehend the best economy, we deploy fair value strategy that is based on the assessment of each sector of the economy and relies on the pullback. Horizontal levels are fundamental in most FX trading strategies used to analyze charts. It can be used as a tool to other FX trading strategies.

Indicators to Foresee Trends

Analysts and traders of financial instruments use a number of indicators to predict FX market. The indicators used provide a simple method to recognize patterns and foresee trends. Candlestick charts are common chart types used by investors and traders but don’t narrate the story of past price actions. These strategies work seamlessly in volatile times. The Ichimoku strategy is an abbreviation of ‘Inchimoku Kinko Hyo’ developed by a Japanese journalist, Goichi Hosoda, in the 1960s. This technique is prevalent in Japan and has gained popularity in other countries as well.

FX Strategies by Experts

Hedging, used by many large institutions, is the best FX trading strategy to curb risk and augment winning possibilities. There are even investment funds named after this strategy. One of the old strategies to study the behavior of stock markets is Elliot Wave Theory developed by Elliot in 1938. Trading could be as complicated or as easy as you want it to be. Trading strategies and indicators can make trading much easier and interpreting the price actions is an expedient way to trade. Charles Dow introduced and developed this type of analysis. Moreover, understanding price actions gives an extra edge to get over the profit line.