A Guide on Currency Convertibility

February 6, 2020

As the name suggests, currency convertibility is all about the ease with which the currency of a country can be converted to other valuables like another currency or gold. This concept has had a significant role in the life of the world economy; it indeed is a key aspect of the seamless functioning of international commerce. All goods that are sourced globally undergo all stages of trade upon a mutual agreement to be paid in a currency that is not the buyer’s domestic currency. A currency’s value can be determined from the convertibility it possesses. With poor currency convertibility, the chances for it to have a high storage value or get swapped for other currencies are quite low. Such currencies with a low value for convertibility will pose a huge risk to the domestic market and economy within those countries owing to the disinterest the other countries express in trading for the domestic currency.

World trade has one of its pillars set on currency convertibility since it is the factor that leads to exponential growth in the capital flow between countries. The need for currency convertibility was felt at a point where the world economy was seemingly in a precarious state without supporting the standard living conditions through essential trading. The use of foreign exchange was regulated by many countries to maintain a decent exchange rate for their currencies.

A Closer Look at Currency Convertibility

In the simplest terms, currency convertibility is the value for free conversion of a country’s currency into the foreign exchange at market rate as determined by the demand and supply. When you have foreign currency (Euros, Pound Sterling) with you and want it converted, currency convertibility comes into play. You can get it converted it into your domestic currency at the exchange rate that has been determined by the market. Authorized dealers such as banks provide proper conversion rate data based on which you can get the money exchanged for your domestic currency or vice-versa.

Only on the capital and current accounts for import and export of invisible and merchandise is the currency convertible. In capital account convertibility, the flows of portfolio capital, direct investment, dividends and their interest, and borrowed funds are easily convertible into the foreign exchange at the fixed exchange rate.

In less complex terms, capital account convertibility can be defined as the ease with which foreign investors can access industries in your country through the domestic stock markets by converting their money into the domestic currency even without the government’s permission. Stability of currency is imperative for the capital account convertibility to function flawlessly. An impeccable performance of the concept within the market cannot be expected of always since the volatility could set in anytime. Therefore, the convertibility over capital is considered to be quite risky, making it valid only after the introduction of current account convertibility which will also entail the stability of currency and control of the deficit in the balance of payments.

How Will Currency Convertibility Benefit You?

The potential for high profits makes export an indispensable part in the market. For the same reason, currency convertibility promotes the business of exporting, consequently adding to its profitability. This rise in profit occurs due to the increase in the exchange rate from the previous market fixed exchange rate. Products that have a lower intensity of import are highly promoted by currency convertibility for exports.
Import substitution is encouraged more when the imports fall with rising expenses due to currency convertibility. This situation is caused when the market-determined exchange overtakes the value of the previous fixed exchange rate.
Currency convertibility also provides incentives to the remittances of foreign exchange by the non-resident citizens and ones living abroad. This step reduces gold smuggling and the inflow of illegal currency formats into the country.
Deficit balance of payments caused by over-valued exchange rates can lead to depreciation of the country’s currency, which in turn will boost the exports. These can be achieved by reducing the imports and raising their prices and also taking down the prices of export. The deficit gets corrected in the process without much of an intervention by the Central Bank.
Prices of goods and in a country will also affect the purchasing power of a currency, which will be further influenced by the currency convertibility. Currency convertibility will, therefore, make sure that the various trading countries have their specific production patterns and international trade ensured through comparative advantage.
Since currency convertibility boosts the capital flow and trade between countries, the chances for the world economy to fall are reduced, and a firm ground is held onto as the value of currency maintains consistency. Hence, it can be concluded that globalization has its strongest roots in currency convertibility.

Types of Currency Convertibility

The International Monetary Fund has set three crucial aspects which have to be conformed to by the currencies for it to be convertible. Usability, exchangeability, and the exchange value of a currency are the factors that determine its convertible value. Currencies all across the world have to satisfy these standards set by the IMF, which according to the variation in its compliance will differ in its convertibility. Currency convertibility has been classified into three depending on these standards:

Fully Convertible

Currencies that have sufficient value to be freely or fully traded at any point of time without any conditions to limit it are known as fully convertible currencies. Almost all the wealthy and stable countries like the US, Japan, Switzerland, and the UK have fully convertible currencies.

Partially Convertible

The currencies that can be traded only with certain restrictions imposed on them by the issuing government are tagged partially convertible. Less stable economies hold such currencies, which include the South African rand, Malaysian ringgit, and Chinese yuan.

Non-Convertible

Currencies that hold no value to be traded at any point of time on the foreign exchange market are tagged non-convertible. It is also known as blocked currency, one of which is the Venezuelan bolivar.

Understanding Forex Arbitrage

Robert K. Peterson

January 30, 2020

The Forex market opens its door for an endless supply of opportunities. It’s size, and aspects involved within its functionality has helped individuals come out with different kinds of strategies. With the end goal of earning profits and considerable returns, these strategies are tested. If they tend to provide an individual with positive results, then everything will head in the right direction. Otherwise, the strategy will not be considered, and traders will begin to ignore the same. On that front, there is a particular strategy that has been tried and tested. People who have utilised the same have come out with excellent results. Since we hate to keep you guessing, you need to know that we are talking about the Arbitrage or the Forex Arbitrage Trading strategy. So if you wish to gain more details about the same, then go ahead to learn more.

What is it?

Forex Arbitrage is a unique strategy that gains momentum by exploiting the price disparity. It tends to act upon various opportunities that are presented by pricing inefficiencies that exist in the short window. For this purpose, it buys and sells different currency pairs with the primary purpose being to utilise an apparent inefficiency to a large extent. So to gain a deeper perspective about the same, let’s look into an example.

Imagine that the currency rates for EUR/USD, GBP/USD and EUR/GBP are 1.1837, 1.6388 and 0.7231. In such a scenario, a trader can purchase a mini-lot of EUR for $11,837. Soon after that, the trader can proceed to sell the same at 10,000 Euros for 7,231 British Pounds. In order to earn a profit, the 7,231 GBP can be sold for $11,850 that lands a profit of $13 per trade. This move also avoids open exposures since long positions tend to cancel short positions in each currency. The same trade can also be functioned by using normal lots of 100,000 that would, in turn, bring out a profit of about $130.

From the above example, it is quite clear how the system tries to utilise inefficiencies in order to correct a particular problem. But in such cases, traders also need to act quickly since these opportunities do not stick around for a long time. The short term nature of the Arbitrage needs to be understood by all means.

Points to be Noted

Efficient – the arbitrage trading strategy not only helps you gain a balance over your investments, but it also helps the markets to be efficient.
Circumstances – the process of Arbitrage will not be possible without the involvement of unusual circumstances.
Temporary – the situations that promote you to perform this strategy are usually temporary and will not head for the long term.
Fewer-Risks – since the process tries to make a profit with no open currency exposure, it tends to include fewer risks.

What Are the other Forms of Forex Arbitrage?

Thanks to the dynamic nature of Arbitrage, you can be assured of witnessing different forms. So to gain more clarity, let’s take a look into a few of these types.

Currency Arbitrage – the aspect of currency arbitrage works with a different style of functionality. Instead of going for the movements of exchange rates, it looks into the differences in quotes of currency pairs.
Covered-Interest Rate Arbitrage – this is another method that tends to utilise favourable interest rate differentials for the purpose of investing in high-yielding currencies and then hedges the exchange risk with the help of a forward contract.
Triangular Arbitrage – a typical triangular arbitrage or cross-currency transaction is one that does not include the U.S dollar when it comes to pairs of currencies. It usually involves Yen and other forms of ordinary currency pairs.
Spot-Future Arbitrage – this particular form of Arbitrage is something that has not been used by a lot of investors. Although they tend to quote their preferred reasons for the same, we firmly believe that it works through. The process is simple, and it involves taking positions in the same currency in a spot and future markets. But for this to click, one has to wait for pricing discrepancy. Since our markets tend to face different kinds of elements, it will arrive sooner or later. So by all means, an investor has to buy currency on the spot market and then wait to sell the same in the future market.
Uncovered Interest Rate Arbitrage – this is a pure arbitrage that involves the process of changing a domestic currency, carrying a lower interest rate to a foreign currency that offers a higher interest rate.

What are its Challenges?

Since most of these strategies take place within the Forex market, it is quite obvious that it comes across specific challenges. On that front, it is now time to look at some of the many challenges that it faces.

Unforeseen Circumstances – although Arbitrage thrives on unforeseen circumstances, certain situations manage to be problematic towards the process. A discount or premium is one such aspect that can hinder the strategy. When such discounts and deals come into the picture, they tend to bring about market liquidity differences. This is not a price anomaly, nor is it an arbitrage opportunity.
Slow Trading- as we all know; Arbitrage requires a rapid platform or entry in order to make matters meet. Slow trading platforms or delays can limit the entire process and put it on hold. This tends to kill the rapid action that it requires and will permanently ruin everything for the worst.
Limitations for Small Traders – the aspect of lending and borrowing for Arbitrage takes place at risk-free rates. Such kinds of rates are usually available only at large financial institutions and corporations. Thus the process leaves out smaller banks or traders who simply cannot afford these enormous costs. The margin cost overhead and spreads are additional factors that reduce the possibility for small traders to cast a spell with Arbitrage.

Understanding Natural Hedges

Robert K. Peterson

January 25, 2020

Natural Hedges is the risk reduction that can arise from normal operating procedures of an institution. A company having sales in a country holds a natural hedge on the currency risk of the country if that country is also generating expenses for the company. The typical financial hedge act in a manner which opposes the movement of underlying securities of a transaction. In the case of natural hedges, the risk is naturally reduced with the means of operations of an institution.

The natural hedges are less flexible and work according to the exchange rate movements. If the exchange rate swings to one side, the operations will be expensive but will also offer higher income. In the other case, the operations will be more affordable, but the income will also go down. Natural hedges can be beneficial during improved operational levels.

Natural hedges are also applicable in case of financial assets such as bonds. When the stocks rise, the bonds perform poorly, but when the stocks fall, the bonds become better. It makes the pair a natural hedge against each other. The process of buying long and short positions in stocks are also correlated and develops a natural hedge.

So far, we have discovered that Natural Hedges are not flexible and offers a consistent benefit or loss according to the operations. It cannot be controlled by investors and can only be used during beneficial times. Let us now look at how natural hedging affects the financial market.

Natural hedging in finances

The portfolio managers look for hedging the downside risk, which also includes natural hedging. The assets that have been performing opposite each other constantly suit natural hedging. The portfolio managers need to specifically look for the historical trends of an institute while selecting a natural hedge. For example, when the equity grows higher, the bonds are shorted in order to cover the downside risk. Bonds can also go higher sometimes, which will tell that the equity has been performing poorly. Another way for natural hedging is to choose pairs trading. A portfolio manager picks up two stocks that are correlated, and if one stock performs well, it will offset the other stock.

Benefits of natural hedging

Natural hedging can provide consistent benefits while reducing the risk of investing on a single side of an institute. It helps in minimizing the risks and helps in the management of investments to avoid the downside. It will assure profits one way or the other and helps a company to survive the challenging market conditions. The investors and traders can also protect themselves from the volatility of price, inflation, and interest rate changes. Natural hedge provides a consistent profit without the need for constantly monitoring the market for adjustments.

Downsides of natural hedging

Hedging limits the profits to a certain extent and can even reduce the profits even further. As there is a low risk of downfalls, the rewards are also not higher. Natural hedging only offers low rewards. The portfolio managers need to constantly do hedging in order to efficiently control their portfolio.

Overall, natural hedging boosts the valuation, increases the ability to raise capital, and provides tax benefits. It is a great way of entering a new market and starts earning profits until you can create your own hedging and investment plans.

Natural Hedge and Financial Hedge

The main difference between natural hedging and financial hedging is that natural hedging is less flexible. But natural hedging does not need operational changes as it happens naturally according to the operations of the market. It also makes natural hedging easy to work with as it does not need complex financial products like derivatives or forwards. Even though both the hedgings are two different strategies, a company can use both in order to acquire maximum benefit. A company which deals in a commodity can shift their operations to a new country where they can sell their products to natural hedge against the currency risk. Later they can use contracts to hedge their risks even further.

A company should go for hedging when there is a significant benefit in it. They should process the potential impact of the commodity or product that they will use for hedging. If the impact is not big enough, hedging will simply be a poor investment. The best strategy is to use hedging when it can make a difference in mitigating risks.

How Does Money Market Hedge Work

Robert K. Peterson

January 20, 2020

Not many of us would be acquainted with the term Money Market Hedge and for reasons that are understandable. We do not deal with Foreign Exchange in our daily lives, and that is why we are not really supposed to know what the term means. But for those who are interested in making a career in foreign exchange and are trying hard to understand what the domain has to offer, you must be first oriented with a set of jargons. One of the most important jargons used in the discipline of foreign exchange is that of Money Market Hedge, and with this article, we shall try to provide an insight into what this means and the ways in which it works. Therefore, without any further delay, let us delve directly into the topic at hand.

What is a Money Market Hedge?

A money market hedge is a technique used to minimize the risks associated with foreign exchange. Simply put, it is a process that hedges the risk factor involved in a foreign exchange transaction in the money market, where short-term investments that are highly-liquid, are traded. Some of these liquid and short-term investments are banker’s acceptances, treasury bills and commercial papers. However, of all the foreign exchange risk management techniques that we have in the market, the instrument of money market hedge might not be a cost-effective one, especially for large organizations who deal with a high volume of trade and exchanges. However, for smaller businesses and investors, managing risks in the domain of foreign exchange with money market hedge is one of the best ways to stay cushioned against the various fluctuations in currencies. This is because these small ventures do not need to use the futures market or forwards contract, and thus, this technique serves to be quite efficient.

How Does the Money Market Hedge Work?

The money market hedge is quite similar to a forward exchange, but of course, there are certain vital differences as well that we are going to be looking into. But first, you need to know why foreign exchange risks occur. There are primarily two reasons why a risk arises in foreign exchange. The first is due to transaction exposure, and the second is due to translation exposure. Hedging the risks associated with translation exposure with a money market hedge might not be possible because it is quite a complex process. But the transaction exposure can be very well hedged with this instrument.

Implementing the Money Market Hedge:

There are a number of scenarios where you can implement the money market hedge, and some of these instances are mentioned below for the sake of your understanding.

In a situation where forward contracts are not available, the money market hedge can be implemented effectively.
Money market hedge can also be used in small businesses where they do not have an access to the forwards market.
Also, the instrument of money market hedge can be used in situations where only smaller amounts are required and where there is a requirement for currency hedge, but without using the currency options.

The Upsides and Downsides of Using Money Market Hedge:

It is a little challenging to draw a strict line between the pros and cons of using money market hedge since the results yielded by this instrument depend on the situation. It is subjective and varies from one situation to the other. For instance, this instrument settles upon one rate of exchange for a transaction that must take place sometime in the future. Now, this could either mean a good thing or a bad thing, because we cannot tell how the currencies shall vary in the future. Also, there a few impediments in implementing the money market hedge that is purely logistical. For example, in the case of a loan where one places foreign currencies, the process might be quite taxing, and rates used in money market hedge might differ from those of the wholesale rates used in determining the currency forwards. Therefore, there is no one way to look at the means of money market hedge. Depending on the scenario, the instrument could either be effective or a failure.

A Few Final Words:

The money market hedge is definitely one of the most vital hedging and risk management tools in the domain of foreign exchange. And though, it might be quite a challenging affair to tell how well it shall work in different scenarios, there is no denying the fact that anyone who wants to wade through the risks in foreign exchange needs to understand the physics behind the money market hedge. Only then can one understand when, where and how to implement them to acquire the results that are desired in a specific situation. There are a host of other tools to minimize risks associated with this domain, and money market hedge happens to be an extremely important one.

Everything You Need to Know About the Patterns for Forex Trading

Robert K. Peterson

January 12, 2020

The Forex or Foreign Exchange is quite a complicated discipline and forex trading, more so. You need a specific degree and a set of skills to be able to become a successful forex trader. It is not an easy concept to grasp, but it is also not something that should give you sleepless nights, should you take it up as a career. Like every domain, forex trading is also dominated by jargons and visuals that one must understand and learn to decode. And though it might take you a couple of weeks or months to get the hang of the domain, fortunately, there are resources and materials on the World Wide Web that can help you in this endeavour.

One such topic that we have decided to talk about in this article regarding forex trading, is the patterns of forex trading. By the end of the article, you should be able to grasp the basic concepts of forex charts, learn the different types of forex charts and use them for the purpose of technical analysis. Of course, the discipline is far too complex and requires introspection that goes way beyond this article. But, hopefully, this article shall gear you in the right direction and make the nebulous affair of forex trading a bit simpler for you.

The Chart Types:

Speaking of forex trading, there are a few chart patterns that you must definitely wrap your heads around before delving deeper into the core. These chart patterns help you understand the pulse of the market and ensures that you are capable enough to do your research. Research is imperative in cracking your way to the best deals. Similarly, research is also essential when you have to make a successful forex trading career. Of the many chart patterns, the two patterns that are used widely are the Head and Shoulder (H&S) pattern and the Triangle pattern. We shall be dealing with these patterns first, and then move on to the others.

Head and Shoulders (H&S)-

There are essentially two things that you must understand while decoding the Head and Shoulders chart pattern. There can either be a topping formation or a bottoming formation. Now, you must be wondering what these two formations are. Here is what you need to know. The topping formation is an uptrend that denotes a high price followed by a retracement and then again, followed by a higher price. The bottoming formation is suggestive of a low price, followed by a retracement and then again, followed by a lower price. These are the two most important points that you must remember while trying to understand and decode this chart. You must also not forget that a neckline connects the two highs and the two lows and this pattern provides an entry level, a stop level and a target for profit, which thus, makes it tradable.

Triangles-

Now, this particular chart works best when you have a short time period to consider. It is one of the most commonly used charts and can be further subdivided into symmetric, ascending and descending. You must understand that the pattern of triangles occur when high prices and low prices start converging, thus, giving rise to the formation of triangles. And just like the pattern we discussed in the previous section, that is the Head and Shoulders pattern, this pattern too is tradable because it provides an entry, a stop and a profit target. You shall know that it is the entry level when the perimeter of the triangle is penetrated. There are, however, several other technicalities associated with reading this chart and trading them. But, for the ease of your understanding, this is what you must wrap your heads around first.

The Other Types of Patterns:

Now that we have covered the two most important forex trading patterns, we shall discuss about a few other patterns in brief for a holistic approach to the matter at hand. One other pattern that is used elaborately is the Candlestick pattern. The Candlestick pattern is convenient since it helps in measuring the movement of prices in not just one time frame, but in all other time frames. This comes in real handy while navigating the domain of forex trading. The second pattern that we need to talk about is the engulfing pattern, which happens to provide a brilliant trading opportunity. It makes it easy to understand the price movements across the time frames and provides an instant read on the market.

Reasons to Decode the Forex Patterns:

The reason why it is crucial for forex traders to be able to decode the pattern is because these charts provide an instant insight into the prevailing conditions of the market. These charts make it quite easy for technical analysis, and you might have a near-perfect solution to your forex trading endeavours. This is why it is important that forex traders learn to read what the patterns imply. Penetrating the market without the technical knowledge of reading the charts or understanding the pulse of the market can get scary, especially when the market we are talking about is that of forex trading. You will not have the first idea of what is going on in the domain. There are several tools that too can be used to analyse these charts. The more efficiently an individual uses these tools to understand the domain, the better chances shall he have in carving a niche for himself/herself as a forex trader.

A Few Final Words:

Forex trading can get overly complicated at times, if you are not too skilled in reading the charts and analysing the direction in which the wind blows. Hopefully, this article has been able to shed light on the crucial aspects of forex trading. The points that we have discussed in this article shall help you get an idea of how the charts work and how you could use them in trade. Read some more and follow up with research to understand the nuances of this field better.

The Major Currency Pairs Trading at the Forex Market

Robert K. Peterson

January 5, 2020

The Forex market tends to bring out different aspects into consideration. Understanding them and knowing their impacts will help a trader make the right kind of investment. In that manner, if there’s one aspect that you need to be aware of, then it has to be Currency pairs. Touted to be ideal and different in all it’s sense; currency pairs help you get a hold of the market. Since they are also subject to change, one needs to be on the lookout before choosing one. Hence, to help you out, here are some of the major currency pairs trading at the Forex market.

1. EUR/USD

Holding Euro as the base currency and Dollar as the quote currency, this particular combination seems to be the most traded aspect on the market. Individuals know all about the same, and they go through a bunch of risks utilising this combination. This pair is also highly liquid and moves ahead to be less volatile. Thanks to the significance and size of their respective economies, things always seem to head in the right direction. But a small amount of uncertainty due to Brexit and the US-China trade war may be quite visible. With the current outbreak over the coronavirus also coming into effect, traders need to be careful.

2. USD/JPY

Yen and the Dollar tend to share a good rapport with certain kinds of changes coming into the forefront. The value of a single pip is quite larger than a majority of the other currencies, and thus, it tends to be quoted only to two decimal places. Yen’s low relative value also plays a vital role in this matter. These low-interest rates are an attempt by the Bank of Japan that helps them to combat inflation and slow growth. Due to all this, the combination brings into effect the criteria for carry trade, i.e. borrowing money from a country that has a low-interest rate and then moving ahead to invest that in a country that has high rates.

3. GBP/USD

This is another combination that gets formalised with the Pound being the base currency and Dollar being the quote currency. This moves ahead to show how many dollars you would need to spend so that you can buy on Pound. Since it is also connected to the deep-sea cables that used to transfer price information between London and New York, the combination is also called “cable”. Individuals with adequate knowledge about the market can smoothly proceed with this pair, keeping in mind the current states of affairs.

4. USD/CHF

The unique pair of Swiss franc and Dollar did not make sense at the start, but through time people soon began to realise its importance. This particular need arises during uncertainties since Switzerland’s economy is a safe bet. The factor of low risk also plays a crucial role in helping investors go through a safer option. Thanks to its reputation for financial stability, banking it against the Dollar is an ideal choice.

Forex Trading Signals

Robert K. Peterson

December 30, 2019

There are numerous aspects that people consider before they plan on entering the Forex market. Apart from the factors of risk and valuable losses, individuals also look into signals. Yes, that’s right. A Forex signal occurs at a specific time and price, suggesting the perfect time to enter in on a currency trade. Top investors and other professionals always keep an eye out for the same since these updates are essential. Once they move accordingly to the information that it brings to the table, investors tend to face a better chance of gaining some good amount of profits. These signals not only curb their moves but also alters their strategies to a certain extent. So to bring more clarity towards the matter and help you gain better, here are some Forex Trading signals.

1. AUD/USD Forex Signal

The AUD/USD Forex signal’s price remains at a pivotal point. It is not triggered by anything and thus carries less percentage of the overall risks. But experts have also suggested that it would be wise to wait for a couple of days. The initial setup did not go as planned, and in the short trade, things did not head in the right direction. With USD pulling back, the price has firmly gone up. The hard-hit assets of the matter stand to be AUD since they tend to get the right boosts. But professionals have also revealed that this impact will be a short term benefit.

2. USD/JPY Forex Signal

The fact that Yen is getting weaker over time is one of the main drawbacks of the matter. As a result, a risk factor of 0.75% comes into the picture and investors need to take a note of the same. Apart from that, the pullback from USD continues to be the other aspect of criteria. But the USD might begin to strengthen over the medium term, thereby bringing in all that matters for the best. The factor of volatility is quite low, and thus short traders are not recommended. So a method that combines various modes and indulges in different measures need to be implemented for this factor.

3. BTC/USD Forex Signal

The pivotal point of BTC/USD stood at $6,418, and a considerable low-level risk factor per trade has arrived. This particular trade’s price has moved up since it has built the right kind of resistance. People who once thought this trade wouldn’t work have come back, as everything has changed for the better. As more governments have come forward pledging bailouts and financial support, the price has recovered to a large extent. This particular action has given room for the price to rise and reach the right stand. But only the coming weeks can decide the fate of this reality. Till then, one has to believe what’s being given to them.

4. GBP/USD Forex Signal

With 0.75% of the risk, a new 35 year-long low price was witnessed last week. But indicators have also predicted a particular form of resistance that seems to be coming at the right time. Market experts predicted that the price would fall for a bit but will ultimately find some kind of support over the short term. When people looked into the same, they realised that everything went as planned. The price did fall at 1.1450 and then moved ahead to recover. A resistance level is being tested at 1.1710. As the Pound is gaining some ground, people are concerned over the effect of the current coronavirus crisis over the U.K and the rest of the markets.

5. EUR/USD Forex Signal

Looking at the current signal, people can be a bit relieved with EUR/USD. It gave around 20 pips of profit to help individuals break-even, and everything took on from that point. The resistance at 1.0815 put forward a sign of a less bearish technical situation. Since we all witnessed the bottom to be 1.0639, experts have moved ahead with clarification. The indications state that this might be something that lasts in the medium term and that there is nothing more to the same. But once again the pullback from USD seems to be hitting again and again. Due to that, it is a bit early to predict the emergence of sharp movements. So investors need to wait at this point to understand how things are going to go forward. Hence, till everything reaches a proper point of clarification, everyone needs to wait and watch to predict the way things are going to turn out.

The Best Advanced Forex Trading Strategies

Robert K. Peterson

December 25, 2019

Trading at the world’s biggest financial market cannot proceed without a bunch of strategies. The need for the same arises due to the complexity of the market by also adding the desire to earn profits. Since that is on every investor’s mind, you require a stable process that can grant you returns. That brings us to the main topic and the need of the hour, i.e. advanced Forex trading strategies. These moves and methods have come into the picture after individuals studied the market in-depth and formed strategies that can combat its many changes. Hence, to give you a clear picture, here are some of the best-advanced Forex trading strategies.

1. Positional Trading

Positional Trading is an essential strategy that is quite different from the everyday process of Trading. It involves long term market analysis that pushes forward this method to be carried on small time frames, ultimately being a form day trading. The main aim of this strategy is to make a trader hold a particular position for an extended period. But the extent of this holding cannot be predicted since it clearly depends on a trader’s perception of the market and the amount of pips gained by him/her. Although this method of Trading tends to be small, it manages to roll in a huge number of pips. This ultimately reduces the risk since traders are not asked to put more than 2% of their funds. By doing so, they are also at a safer position when the market tends to fluctuate and moves ahead to bring in different numbers.

2. The Triangular Arbitrage

The Triangular Arbitrage is another method that is well known among professional traders. It came into existence after individuals released that they could amend ways by using aspects like currency pairs. Since the market provides an ample number of opportunities, such methods were proven to work. So by all means, the Triangular Arbitrage is a strategy that revolves around three currency pairs being used simultaneously. But to promote these transactions to bring in profits, you need to have minimum knowledge about the market, including the impact of currency pairs. Combining currencies like Euros, Dollars and Pounds, you can make this strategy work. By giving a node to the number of risks involved in the process, you will be heading in the right direction. So move ahead to learn more about this strategy by giving it the required attention and then proceed towards implementing the same.

3. Forex Scalping

Forex Scalping is an advanced strategy that every trader has applied at least once in their lifetime. It was pushed forward to be a common trend and individuals couldn’t prevent themselves from utilising the same. The main goal of this strategy was to help an investor achieve satisfactory trading profits that come quickly. For this purpose, the Trading needs to be performed in brief time frames and not short ones as we performed in Positional Trading. Due to the nature and mode of its implementation, this strategy sits well with all day traders. By conducting some effective measures to gain market analysis, traders can push forward this strategy into the successful realm. All they need to do is to take out a position for a time frame that should not exceed five minutes. This move stands to be benefitted when different kinds of fluctuations enter the market.

4. Nonfarm Payrolls Trading (NFP)

This particular strategy came into effect after individuals took note of a significant economic news of the same name. The phenomenon occurs once every month and day traders tend to get affected the most. The task at hand is to identify the possible results of NFP and then make suitable judgements as to how they might be different from the previous and forecasted values. Since a trader tends to adhere to the Forex Calendar Page, they can ensure that they have enough margin to withhold possible market fluctuations that come into the scene after the NFP results are announced. If the news tends to be the way you expected it to be, then you will gain a considerable number of pips in a matter of hours. But if it goes against your plan, then things will end up with losses. Towards the end, it is all about making pips out of a winning trade and later restructuring when your predictions don’t head in the desired direction. Hence, keep these strategies in mind to earn some good amount of profits with Forex trading.

12Page 2 of 2

Your Guide Towards Advanced Analysis for Forex Trading

The Best Advanced Forex Trading Strategies

What Are The Different Types Of Forex Trading Strategies

Everything You Need to Know About the Patterns for Forex Trading

The Major Currency Pairs Trading at the Forex Market

Live Forex Date: 26/03/2023 Base currency: United States dollar
Euro (1 EUR)
Pound sterling (1 GBP)
Japanese yen (1 JPY)
Swiss franc (1 CHF)
(1 )
Canadian dollar (1 CAD)
Australian dollar (1 AUD)

A Closer Look at Currency Convertibility

How Will Currency Convertibility Benefit You?

Types of Currency Convertibility

Fully Convertible

Partially Convertible

Non-Convertible

What is it?

Points to be Noted

What Are the other Forms of Forex Arbitrage?

What are its Challenges?

Natural hedging in finances

Benefits of natural hedging

Downsides of natural hedging

Natural Hedge and Financial Hedge

What is a Money Market Hedge?

How Does the Money Market Hedge Work?

Implementing the Money Market Hedge:

The Upsides and Downsides of Using Money Market Hedge:

A Few Final Words:

The Chart Types:

Head and Shoulders (H&S)-

Triangles-

The Other Types of Patterns:

Reasons to Decode the Forex Patterns:

A Few Final Words:

1. EUR/USD

2. USD/JPY

3. GBP/USD

4. USD/CHF

1. AUD/USD Forex Signal

2. USD/JPY Forex Signal

3. BTC/USD Forex Signal

4. GBP/USD Forex Signal

5. EUR/USD Forex Signal

1. Positional Trading

2. The Triangular Arbitrage

3. Forex Scalping

4. Nonfarm Payrolls Trading (NFP)

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