Forex Trading Strategies / Fundamental Forex Strategies
The Carry Trade Forex trading strategy is very different from other forex trading strategies in the way that it operates. This forex trading strategy allows us to make a profit even when the market is stable as it does not rely on the movement of prices between two currencies but rather on the difference between the interest rates of two currencies.
We have discussed many Forex trading strategies that allow us to analyze the price action from many different angles. These trading strategies give us the technicals however there's one factor that always has the potential to make all of the technicals irrelevant and sway the market in any way that it likes. Big news events from different countries can have a huge effect on the market, effectively rendering all our analysis meaningless.
Market sentiment is the momentum of the market. All traders have a style when trading in the forex market - some might be bullish and some might be bearish. The market sentiment is the style of the various traders combined, producing an overall feel for the market.
The forex market can be very volatile. But we can turn the market volatility in our favour with certain trading strategies, such as widening targets, low leverage, portfolio diversification, minimize risk etc.
Arbitrage is a speculative strategy, where someone attempts to profit from price differences of the same instrument either in the same market or in different markets. It involves buying and selling an asset at two diffenct prices in order to profit from the difference.
Fair value strategy shows which of two economies is in the best shape. You evaluate and weigh each sector of the economy to see the performance of the entire economy.
At the beginning of 2015, we reviewed the events and risks which were expected to happen during the year, as it is usually the case with forex traders/analysis. We took a technical look at GBP/USD after the fallout following the Scottish independence referendum and concluded that this pair would stop falling (and probably move up on a rate hike) from the BOE. The first half of the assumption was correct, but the second part wasn't because the global economic situation worsened and the BOE has remained dovish ever since.
We also predicted that the Euro pairs would continue to slide since the ECB had already announced the start of quantitative easing. Although, we didn't expect EUR/USD to fall beyond 1.10, which came short of the real bottom at 1.0460. Below you can find the analysis as of December 2014.
On June 23rd, the British people voted whether or not to stay in the EU. This move has great implications for the Pound prior and after the referendum, as well as for the Euro.
The central banks shift interest rates to help the economy and inflation. These moves have a great impact on the forex market and related currencies.