The Best Forex Trading Strategies For 2019

The foreign exchange market, otherwise known as Forex or simply FX, is the largest market for currency trade in the world. Many investors are drawn towards the FX market because of the vast potential for profitability and return on investment (ROI).

As a matter of fact, around $5.4 trillion worth of currencies are being traded daily on the FX market. However, unlike other investment opportunities available on the market, such as stocks, bonds, real estate and others, trading in currencies involves more risk, mainly because of the trade's dynamics and the market's volatility. In other words, short and risky investments promise more profits compared to mid or long-term investment plans.

That's why numerous traders leverage proper risk management and investment planning strategies. But when it comes to actual trading strategies, how should someone approach the Forex market? The fact of the matter is that every trader has a unique way of doing things. With that in mind, here are a few of the best Forex trading strategies for 2019.

Market correlations

Trading currencies on the FX market comes down to trading currency pairs. There is a wide range of currency pairs for you to choose from and each is from respective regions they belong to, such as the US, UK, Europe, Asia and Australia.

Needless to say, every currency is tied to various factors, such as the state of the economy, financial services, real-world assets and many others that impact the currency's value and price. By understanding the market correlations that impact currencies, you can adjust your trading strategies accordingly. In other words, you'll know which market trends will influence a currency price, which will help you determine how to trade your currency pair.

As an example, the value of the US dollar (USD) correlates to the state of the Wall Street stock market, due to the vast growth and revenue index originating from this market. In addition, the Canadian and Australian dollar (CAD, AUD) are strongly correlated to the commodities price on the market. The main reason is that most of the GDP of both these countries originates from natural resource mining.

Day trading strategies

As mentioned before, short-term trading strategies involve greater risk but they also promise more profitability and ROI. That's why traders who like to take extra risks opt for a strategy exclusive to the Forex market, called day trading. The main reason day trading is quite effective is that it presents an intensive approach to the trade that's otherwise quite sensitive to market events and correlations.

There's also a factor of high trade volumes on the FX market that make short-term investment opportunities quite lucrative. Day traders usually identify or predict market trends upfront and will, therefore, trade in the direction they choose until they reach support or resistance.

Due to the fact that day trading is quite risky, it's recommended for new traders, as well as traders who haven't explored this strategy yet to practice first on a demo account. You can opt for an online trading platform, such as Ever Forex for instance, that provides users with a demo account. After you've practiced with virtual assets and strategies, you can engage in active Day trading.

Trading option strategies

Every investment involves a certain risk. The greater the risk, the greater the reward. However, as much as traders and investors prefer such odds, they also want to minimize and mitigate the risks while maximizing their profits. Fortunately, there's always a way to do a bit of both. A good example of this is trade options.

This strategy serves as a hedge or even a way to diversify an investor's portfolio. Options also work well with support and resistance levels. But what exactly are support and resistance levels in Forex trading? Simply put, a resistance level is the highest currency price at which the market itself starts to believe that a currency is becoming overvalued. On the other hand, a support level is the lowest currency price where the currency will halt its decline before it goes up again. This is where trading options, such as a call or put come into play.

Options exist in both stock and Forex markets. As an example, a call option allows an investor to buy at a specific price while a put option allows them to sell at a specific price regardless of the asset's price at the moment of the trade. Whether it's a stock or a currency, investors can use options strategies to lower the risks while increasing the profits. In the FX market, options can be a good strategy that leverages your predictions of support and resistance levels for your currency pairs.

The forex market is quite a dynamic environment. Investors can choose their own pace and opt for strategies that suit their trading style the best. Everyone has a unique style and approach to trading currency pairs. That approach allows them to reduce risk and hopefully improve profits. If you plan your investments well and choose your strategies accordingly, you can make a profitable career out of currency trade on the FX market.

Emma is a digital marketer and blogger from Sydney. After getting a marketing degree she started working with Australian startups on business and marketing development.