• Currency trading is popularly known as forex trading and is the procedure of purchasing and selling currencies in the international financial market. It is one of the largest and most liquid financial markets, that has a daily trading volume of more than $6 trillion. Unlike the traditional stock market, forex works 24 hours a day, five days a week, which makes it easily accessible to investors. If you are a beginner or an experienced investor, it is crucial to understand the main strategies that will significantly improve your chances of success in forex trading. In order to successfully enter the era of currency trading you need to sign up for a suitable trading platform that aligns with all your investment goals. This blog will provide key strategies that you can use to attain success in the forex market.  

What is Forex Trading? 

• Forex trading stands for foreign exchange or FX trading, consisting of exchanging one currency for another in order to make a profit. Forex market is a global decentralized marketer, where currencies are traded in pairs. It is also the largest and most liquid market in the world because of its global reach in finance, trade, and commerce.  

• Forex trading is all about predicting one currency’s price and comparing it with another. When you are trading in the forex market, you are exchanging one currency for another. In forex trading individuals gain from shifts in currency value, to make money you need to predict whether there will be a rise in currency pair or fall and then create a position that stands to profit.  

Currency Trading in Pairs 

• In forex trading, a currency pair showcases the exchange rates between the two different types of currencies. It shows how the value of one currency is tied to another. The first current of the currency pair is the base currency, while the second is known as the quote currency. The currency pair shows how much of the quote currency needs to be purchased for one unit of the base currency. Some of the commonly traded forex pairs are: 

• EUR/USD (Euro/ US Dollar) 

• USD/CAD (US Dollar/Canadian Dollar) 

• USD/JPY (US Dollar/Japanese Yen) 

• AUD/USD (Australian Dollar/ US Dollar) 

• GBP/USD (British Pound/ US Dollar) 

How Currency Trading Works 

• Forex trading occurs in three primary markets, these are: 

Spot market  

• In this market securities, currencies, and commodities are exchanged for immediate delivery. This market is also called a ‘cash market” or “physical market” because transactions take place for the immediate exchange of commodities for cash. However, the settlement which is the actual transfer of funds may take a few days. The agreement for trading occurs “right now”.  

Futures market  

• A futures market is typically an auction market where investors purchase and sell futures contracts in order to deliver a financial instrument on a specific future date. These contracts are mainly standardized agreements to purchase or sell a particular asset at a determined price on a future date.   

Forward market 

• This market is an over-the-counter market where contracts are for the future delivery of an asset for a price agreed in advance. These markets are commonly related to foreign exchange markets. The forwarded price is mainly influenced by factors like current spot price, expectations for future supply, interest rates, and supply and demand.  

Main Strategies for Forex Success 

• In order to achieve success in forex trading you need to implement a myriad of strategies and techniques. Some of the main strategies are: 

Trading style 

• There are four main types of trading styles that investors use: scalping, swing trading, day trading, and position trading. The main difference between them is their duration. Select a trading style that is suitable for your trading personality.  

• Scalping- It is a very short-term strategy in which traders make a profit on small price increases and hold their stocks for minutes. It consists of rapid trade and demands focus and stamina.  

• Position training- It is a long-term strategy that consists of holding positions for years. Investors here are patient and want to earn long-term profit despite short-term market changes. They rely on fundamental evaluation to recognize stable currency pairs.  

• Day trading- This strategy consists of opening and closing positions on the same day. It capitalizes on intraday price fluctuations. Day traders do not hold positions even overnight and depend on technical evaluation and real-time insights to make rapid decisions.  

• Swing trading- This style focuses on gaining medium-price momentum. Holding positions for weeks or even months. Swing trades evaluate daily and weekly charts to recognize potential trends and implement research such as economic and location data into their strategies.  

Market evaluation  

• Market evaluation is a simple strategy and has few trading rules. It also requires a nominal amount of indicators and is more effective as it generates successful trades.  

Candlestick patterns 

• Candlestick patterns refer to the visual representation of price movements in a certain time period, and are used to predict future direction. They showcase an increase in supply or demand. The peak of the candle’s wick shows the highest price for that certain time, whereas the bottom shows the lowest price.  

Stop Loss points 

• A stop-loss order in currency trading is a tool created to limit a trader’s loss when the market situation is not in favor of the investor. It is a predetermined exit point that closes a position if the price has reached a specific level and helps to reduce losses if the market is moving against the position of a trader.  

Main Currency Trading Concepts You Should Know 

• The main currency trading concept consists of fundamental as well as technical evaluation, understanding the economic indicators, geopolitical events, and even interest rates. Some of the main concepts are: 

Fundamental evaluation 

• This consists of evaluating economic, political, and social market forces that may impact a currency price. In fundamental analysis, regular monitoring of economic indicators, along with central bank decisions, is done in order to predict price fluctuations in the value of a currency. Economic indicators such as the consumer price index and even GDP are closely monitored as they offer insights into the economy of a country.  

Economic indicators 

• Regularly monitoring economic indicators like GDP, inflation rates, and employment numbers is significant as it provides information about the economic position of a country, this in turn helps in predicting currency rate fluctuations. Strong economic indicators usually equate to a strong value of a currency while weak indicators can even lead to depreciation in a currency’s value.  

Political and geopolitical events 

• Political stability along with policies encourages economic growth and usually develops a stronger currency. Major geopolitical events like wars, elections, and even changes in political parties can create a major impact on the economic stability of a country and depreciate currency value.  

Technical evaluation 

• Technical evaluation consists of studying price charts and even using technical tools in order to predict future price fluctuations. Investors mainly use technical analysis like breakouts or moving averages to customize their investing strategy.  

Interest rates 

• Interest rates are set up by central banks, and are a major indicator of the currency value of a country. Higher interest rates often attract foreign investors and increase demand for the currency of a country.  

Key Indicators to Focus On 

Moving average 

• This indicator showcases the average price over a certain time period and assists in identifying trends. When the price of a share goes above the MA, it shows an uptrend while below represents a downtrend.  

Moving average convergence divergence 

• This is a trend that follows the momentum indicator showcasing the relationship between two moving averages of the price of a currency pair, representing changing market conditions.  

Stochastic Oscillator 

• It is a momentum indicator that mainly compares a currency pair’s closing price to its price range over a certain period. Readings that are above 80 showcase overbought conditions, while readings that are below 20 represent an oversold situation.  

Relative strength index 

• The RSI is typically a momentum indicator that mainly measures the speed and change of price fluctuations on an average scale of 0 to 100. An RSI that is above 70 showcases an overbought condition, showcasing a potential price correction. Whereas an RSI that is below 30 represents an oversold condition, showcasing that there may be a potential price increase.  

Conclusion 

• In order to achieve success in currency trading, one needs to have an adequate knowledge of all the currency trading-related concepts. By mastering technical and fundamental analysis, and using the right trading platform, investors can achieve success. For investors or beginners wanting to expand their trading experience, Thaurus provides professional trading solutions along with real-time data insights that will assist traders in successfully navigating through the complex stock market.  

• Contact us and our team of experts will get back to you within 24 hours.