There are various type of currency trading strategies that trader can choose to use. Among those types, some of them are very popular among the trader for many different reason. Including the simplicity and the high potential of success.
Here are currency trading strategies that popular among the trader:
Currency Trading Strategies – Speculating Strategy
This is basically one of the most popular strategies that use by many traders around the world. The idea of speculating strategy is where the trader will buy or sell an asset.
Usually with the risk that is higher than usual. And they can get a much bigger profit by taking advantage of the move they predicted before.
The traders who use this strategy are the speculator. They make wager about the rise or the fall of a value of a specific currency to another currency in pair.
The speculator who uses this strategy is not limited to individual trader. But also include organization such as commercial banks, investment banks, or even hedge funds.
This strategy usually used in liquid and active currency pairs. The traders or in this case the speculator will wager that a currency will go higher and the pair will go lower.
In order to be success in using this strategy, the trader must understand the characteristic of each currency they use. And also the factors that will cause the movement to happen between the pair.
Currency Trading Strategies – Hedging Strategy
When a company sells their product or service in foreign country, they will be paid with the local currency. If the currency is fluctuating, the value of the sale can go high than hoped. Or it can go down to the bottom.
This is a huge risk that the company must be prepared for. And using hedging strategy can help to protect them against this kind of possibility.
This strategy usually involved a sizable portion of daily currency turnover. It will help the company stay safe from fluctuating currency.
This is the currency trading strategies that was usually use by big companies. They want to protect themselves from the fluctuating currency.
Fluctuating currency affect lots of things. And for business people especially those who made international transactions, it could be one thing that separate between getting profit or not.
Currency Trading Strategies – Carry Trade Strategy
In this strategy, the trader is looking for a pair of currency that has stable relationship.
The trader will sell the currency from the country that has low interest rate. And then they will use the money to invest into a currency that comes from the country that has high interest rate.
This strategy is very popular among big traders. And it usually uses during low market volatility when the currency rates are pretty stable.
Currency Trading Strategies – Arbitrage Trades Strategy
This strategy is pretty straightforward. This is where the trader buys a currency and sells it right away although the price difference is so small. It gives the trader small yet risk free profit.
This strategy is very popular among big traders who keeps the risk as small as possible. In order to get big profit, the trader must trade in large sizes to magnify the small profit they get.
All these strategies are the most common and the most popular currency trading strategies that most traders use. If you implement the strategies with forex technical analysis, it will give you a better result.