Currency Carry Trade Strategy
Carry trade involves the sale of financial instruments with a lower interest rate, which we use to buy financial instruments with a higher interest rate. When doing a carry trade, you can still limit the loss as with normal trading. It is needed to find a high interest rates.
￼￼￼Traded USD/CHF is explained by the great interest of investors for the two economies of the world. The most important feature of this currency pair prices are moving in one direction. USD/CHF supports a rising trend line. The weekly charts USD/ CHF in the period of the last seven months have seen a clear rising trend line from May 2015 to January 2016.
￼￼￼￼The price level reaches from 0.90700 to 1.03000 in the last seven months. The number of pips of 1230 pips is this currency pair. There was registered a sharp drop in the price for a time. Followed by an upward trend line. It exists with a negative interest rate for the Swiss franc of -0.75% while 0.25% interest rates for the U.S. dollar. It was raised to 0.50% in December 2015. That is a 1.25% difference between U.S. interest rate and Swiss franc interest rates.
This pair’s interests are long-term business for many investors and traders independent of volatile movements in the currency market. Interest rates and interest rate differentials between the currency change is attractive for the Carry trading strategy.
Currency Correlation Trading Strategy
One needs to pay special attention to the global currency market. It is influenced by many factors: supply, demand, political conditions, interest rates and economic growth. All indicators are indicators collected with more updated information. Economic growth and exports are related to domestic industrial production. Forex major currencies are in direct correlation with certain goods. Currencies are closely linked to commodities. These are the Australian Dollar, Canadian Dollar and New Zealand Dollar. Swiss Franc and Japanese Yen are also sensitive to currency movements of commodity prices.
When the US dollar rose against the euro, pound and the yen the following happened:
EUR/USD is capped by negative trend lien
GBP/USD is capped by negative trend line
USD/JPY is supported by rising trend line.
The price of oil affects the industry of countries and their currencies, which is favorable to all those who are engaged in speculative activities trading on the Forex. Predicting the next movement in the market, is the key to making money. However, this simple concept is practically very difficult to apply in practice.
This is due to numerous factors that influence the global market, supply and demand, political and international relations, economic growth, interest rates,
and many others.
However, some of these factors, such as economic and business growth in the state, is directly dependent on industrial development. Which still depends on what will be the price of oil on world financial markets. This leads to the conclusion that the price of oil is in direct correlation with the values of the currency state, depends on the industry and economic growth. Of course, this correlation can be positive or negative, depending on whether a country is a major importer or exporter of oil. No matter, the oil price has a significant impact on currency countries. Otherwise, oil prices only affect most currencies of highly developed countries, which include the US Dollar, Canadian Dollar, Japanese Yen and the like.
The price of gold in the stock market can best be traced to the most important and largest market of gold in physical form. Trading in Forex is a highly significant correlation between the gold price on the stock market and the price of currencies. It is notable that this relationship is very volatile because the price of gold depends on many factors.
The price of oil acts as an indicator of trends in the exchange USD/CAD. This means that when the price of oil rises USD/CAD falls. When oil prices decline USD/CAD rises.
London Trading Session Strategy
London’s open forex trading strategy has more experience in the market during the European session. The European trading session is the area of expertise in the market London opens forex trading strategy. It has the required level of understanding and knowledge of currency trading. It is important as a significant experience. Professional presentation trading strategies to traders and starting to learn technical analysis.
The market is opened 24 hours a day, five days a week. There are three markets, the Asian, European, and U.S. markets. The Asian market has slowed, while the European and the U.S. markets are living with a lot of turbulence. The largest volume of trading takes place on the markets when London and New York overlap, its time frame is from 8 a.m. – 11 a.m. EST. London’s trading strategy gives special emphasis on the European session in time frame 3 a.m. – 11 a.m. by EST.
During this period, the largest occurring turbulence in exchange rates and in particular of the currency pairs EUR/USD and USD/ JPY. This is a time of when publishing strong economic data which affects positively or negatively, the growth rate. If the published data is higher than expected, it will have a positive impact on primary currency. For example, if the trade balance in the Eurozone rose more than expected, exchange rate of the Euro will rise and the dollar will fall. This means that Euro gets stronger against the U.S. dollar.
Strategies are often applied to different markets and different scenarios. It concludes to what the trend of the market is growing, falling, or going sideways. Is the price in an upward swing? Or has it reached its extremes? Is volatility high or low? Is it tested for support or resistance? Answers to these questions will be given by London Forex Trading Strategy. It uses the necessary tools like Candlestick, which determines the highest and lowest price of the exchange rates, or the bottom and peak of the trend channel.
You can see that from every market there are times when both markets are open (overlap). Between 08:00 – 09:00 GMT markets for Tokyo and London are open, and between 13:00 and 17:00 hours GMT are the markets of London and the United States open. Of course, these are the most active times to market, because there is more volume from when the two markets are open at the same time. As you can see, it’s during the London market, is usually when most of the movement happens.
|New York open||8am||13.00|
|New York close||5pm||22.00|
Support/Resistance Trading Strategy
Traders use it for the identification of important levels of support and resistance. They can be very useful since many currency pairs usually vary between these levels. When trading in a range the trader uses for the identification of trades, and thereby places an order for purchase near the line support, and an order for sale near the line of resistance. The market follows a price of opening, closing, highest price and the lowest price for the day. These are the basic information required to calculate the support resistance levels. It is uses the information from the previous day to calculate potential levels at which the price will change its direction in the day when we trade. Since many traders monitored support/resistance levels, and the market usually reacts to the same. This gives you the possibility for successful trading.
Support/resistance line should be the first place to look when you open your position. It is the primary level of support/resistance. The biggest price movements usually occurs between the support and resistance levels. When price reaches the support/resistance line, you will be able to determine whether to go long position or sell position. You can set up stop loss above the support/resistance line and initial profit target would be first support line. The same applies to the upward trend.
Currency pair touches a few times support/ resistance levels then reverses, the level becomes stronger. If the pair is approaching the upper level of resistance, you can sell it and set a protective stop loss immediately above the level of resistance. If the pair continues to move upwards and dash above the level of resistance, it would be considered in ascending breakthrough. The above default short position will be closed (SL), but if you believe that a breakthrough has strong buying power, you can come in again, but this time in a long position. In this case, you can set a protective stop loss (SL) immediately above the first level of resistance. Which has just broken and now acts as support. If the pair is closer to the lower level of support, you can buy a pair and set a stop loss below the level of support. In the Forex market support/resistance strategy does not always work. Sometimes the price will stop immediately to the support/resistance levels.
One can see support/resistance level on EUR/USD. It represents a trend channel of daily price movements. H1 charts shows the highest level of 1.08600 and the lowest level of 1.07850. Its daily range of 75 pips. The highest level is called the resistance, sometimes it is called the peak. The lowest level is called the support, sometimes it called the bottom. On a daily basis if you use support/resistance trading strategy it can be used to sell positions below 1.08600 and closed above 1.07850. This is a 75 pips profit.
Trading the News Strategy
Trading the news strategy is based on economic news. It includes publications of economic data. There are strong economic indicators: like interest rate decision, GDP, Unemployment Rate, Retail Sales, Industrial Production, and Manufacturing PMI. They are called market movers in the Forex market.
The second largest economy in the course of this week announced a series of economic data. Chinese gross domestic product fell in December to 6.8% from 6.9% from the previous month. This was in line with analyst expectations.
The report shows that industrial production of China fell in December to 5.9% from 6.2 % in the previous month, during the predicted decline to 6.0 %.
China’s capital investment fell in December to 10.0% from 10.2% in November. Economists were expecting it to remain unchanged.
Retail sales fell in December to 11.1% from 11.2% from the previous month, while economists were predicting growth at 11.3%.
During the published Chinese economic data the traders are focused on currency pair AUD/USD. Why? It is the simple answer. China is the largest trading partner of Australia.
Worse than expected is the economic data that was caused by the negative trend line on AUD/USD. Forex pair AUD/USD dropped 700 points or 70 pips from 0.69250 to 0.68550. In this case, it can be used as a selling position on the trading assets.
￼￼￼￼German Economic Sentiment have deteriorated in January by 5.9 points to 10.2 from 16.1 in December. Analysts had expected a decline of 7.9 points to 8.2.
Final Consumer Price Index fell in December was unchanged of 0.2%. It was in line with the forecasts of economists.
ZEW Economic Sentiment fell in December to 22.7 points from 33.9 points in the previous month while it was expected a decline to 27.9 points.
Final Core Consumer Price Index was unchanged of 0.9%. It was in line with the forecasts of economists.
It was published mixed economic data in Germany and the euro zone. EUR/USD jumped over 90 pips after published economic news. What is the most important?
The strongest economic indicator German ZEW Economic Sentiment rose 2 points. It was better that expected economic data. That’s why EUR/USD jumped to 1.09369 from 1.08469.
The Bank of Canada kept its benchmark interest rate in January to 0.50 %. Analysts are predicting a reduction to 0.25 %. This was published on the 20th of January. We can see the following:
After published economic data the pair dropped from 1.46615 to 1.41182. It is a total of 5443 points or 543 pips profit. Traders use selling position and sell USD/CAD below 1.46600 and close the position above 1.41200. This is almost 540 pips.