Strategy 1 – Market Sentiment
Market sentiment is simply what the majority of the market is perceived to be thinking or feeling about the market – it is the most important factor that drives the currency market.
Strategy 2 – Trend Riding
Many traders live by the often-repeated “the trend is your friend until the end” rule; they are comforted with the knowledge that they are with the majority of the market. Being able to ride on a trend is akin to making full use of the wind direction to steer your ship towards your destination.
Strategy 3 – Breakout Fading
Support and resistance levels, whether they are found amidst chart patterns, indicators or along trend lines, are an indication of where a predictable price response can be expected. A support level is where buying pressure overwhelms selling pressure enough to interrupt or reverse a downtrend. A sturdy support level is more likely to hold up even if prices slightly pierce through the support, and that presents traders with an excellent buying opportunity.
Strategy 4 – Breakout Trading
Despite the notoriety associated with trading breakouts, it remains one of the most fundamental concepts in trading. A breakout typically occurs when the currency price moves beyond a period of consolidation or trading range, or when the price penetrates above or below an established price level, which can be a resistance or support level, resulting in follow-through of prices past those levels, whether temporarily or permanently.
Strategy 5 – Decreased Volatility Breakout
Trading breakouts is undeniably one of the most popular ways of profiting from the Forex market. Pull up any currency price chart and you will notice that currency movements can be quite volatile as they often fluctuate even in the midst of a trending phase, rallying at one moment and declining the next, or vice versa.
Strategy 6 – Carry Trade
A carry trade is a long-term fundamental trading strategy that involves the selling of a particular currency with a relatively low-interest rate and using the funds to buy a currency that gives a higher interest rate, with the hope that the high-interest-rate currency will appreciate against the low-interest-rate-currency.
A basic carry strategy: Buy currency with a high-interest rate (Currencies with typically high-interest rates: GBP, NZD, AUD, CAD). Sell a currency with a low-interest rate (Currencies with generally low-interest rates: JPY, CHF).
Strategy 7 – News Straddling
The Forex market is extremely sensitive to the flow of news that is related to it, and major short-term currency moves are almost always preceded by changes in fundamental views influenced by the news. Traders around the world make a living by processing and translating information into money.