Different Forex trading strategies to help weather the current economic climate - Regal Core Markets

 

Forex, or foreign exchange, is the most liquid financial market right now. When it comes to trading volume, the forex market has an estimated turnover of US$ 6.6 trillion a day. With its steady increase in globalization, there appears to be a similar increase in importation and exportation, which gives rise to busier foreign exchanges happening every minute of each day.

How COVID-19 heavily affects forex trading

Due, however, to the onset of the 2019 coronavirus (COVID-19), an unprecedented pandemic that continues to ravage the world at present, massive trends in the global market have become volatile and unstable.

Experts predict an insurmountable threat of recession among even the major conglomerates in the market as the coronavirus causes the inevitable closure and bankruptcy of numerous businesses worldwide.

There’s a massive cessation of jobs and an increasing inadequacy of food resources is observed, due to the widespread enforcement of lockdowns and quarantine measures enforced, specifically, to stop COVID-19 transmission. China was the first to close its doors to the outside world and businesses within the country. The country’s import-export transactions were profoundly affected by the necessary move.

Predictably, forex trading has been majorly affected, primarily because of these various protocols that now hinder constant and continuous exchange. Nonetheless, the market proves to be more reliable than it seems. Hence a steady, albeit slow, influx of trade keeps forex trading alive.

Forex market trading strategies

Nonetheless, there is a need to strengthen forex trading further and compensate for the diminishing activity caused by the COVID-19 pandemic. Traders amplify their standing in the global markets by utilizing several strategies to keep up with the growing concerns of the worldwide recession.

Mentioned below are several strategies employed by traders in the foreign exchange market.

Day Trading

“Day-trading refers to an extremely active trading strategy in which traders move quickly in and out of stock positions to capture small profits on each trade. Typical day-traders close out positions by the end of each trading day to avoid the risk associated with overnight price changes,” says in a research paper published in the Asia-Pacific Journal of Financial Studies.

Day trading is a type of exchange that is characterized by the buying and selling of a specific security, all done in a single day. Day traders focus on minute changes in the market and capitalize on them. They take profit from highly volatile transactions, taking advantage of the rapid, minute-by-minute changes in the global-wide trade. One strategy that can be applied when day trading is range study.

“A range study refers to when a currency is being traded between a set upper and lower limit and appears to consistently be moving back and forth the higher and lower limits. Traders will capitalize on the opportunity to buy when the asset price is at the lower limit and sell when it is at the higher limit,” says in a research study published by Regal Core Markets.

Apart from range study, here are other strategies under day trading:

1. High-Frequency Trades (HFT) – Traders utilize intricate algorithms to make the most minor and short-lived market fluctuations.
2. Scalping – Traders try to build profit on the different price fluctuations that happen throughout a day.
3. News-Based Trades – Traders look into the current events that may significantly affect the day’s forex trends.

Swing Trading

Swing trading is another type of trade wherein traders try to gain profit by purchasing securities and holding on to them for several days or weeks. Traders utilize either technical or fundamental analysis to capture the best timing to buy and sell stocks and any other kind of security, a couple of automated functions that ensure reliable transactions.

 

1. Technical Analysis – Traders attempt to predict various price fluctuations by analyzing historical information, precisely volume and price.
2. Fundamental Analysis – Fundamental analysis, on the other hand, is done by examining the economic situation of a country or a currency to understand and predict the probable future of securities originating from there.

Automation as a way to revive and maintain forex trading

The continuous effects of the coronavirus play a significant role in the increasing need for more advanced automated tools that can detect and analyze numerous changes in the forex market. As more people turn to the news, and various online stock market sites, the necessity to pinpoint possible investments across the world is made possible by advanced algorithms, software, and dedicated websites.