Compared to bonds and equities, the futures market is the largest market with the most liquidity, with over $6 trillion traded daily. For those just entering the foreign exchange market, they may be surprised to find that with over 180 different types of fiat currencies available, the majority of trades and payouts are made with US dollars, Euros, British pounds, and yen. Additionally, currencies like the Australian and Canadian dollars, as well as the Swiss franc, cannot be traded via swap, spot, forward, or option. Yet despite the particulars, the one thing forex does have in common with other trading markets is to gain returns while maintaining risk management. To be successful in forex trading, you will need a sound strategy.

Fundamental Futures Trading Strategies

Fundamental traders take a high-level view of the factors that drive the value of a currency. For instance, if the Federal Reserve raises interest rates, institutional investors (insurance companies, mutual funds, etc.) will pull money out of equities in developing markets and put their funds in T-bills and related instruments that have a higher credit rating. This increases the value of the dollar against other foreign currencies. At the other end of the scale, if the United States expanded social and stimulus programs – as it did in 2020 at the start of the pandemic – the threat of inflation will depreciate the value of the US dollar. Fundamental traders filter domestic and global events through a lens to find currency pairs.

Technical Trading Strategies

Evolt partners and technical traders look at historical currency trends combined with real-time granular analysis to plan long-term and short-term strategies. Some leverage time frame scenarios to determine how a pair of currencies will perform for the short, mid, and long term. Others use candlestick patterns to identify when trend reversals will occur, so they can anticipate when to support a currency pair and when to pull out. Technical traders also use indicators based on a Fibonacci sequence to follow currency movement and trends to make decisions.

Position Trading Strategies

Fundamental and technical traders alike utilize position trading strategies. With position trading, fluctuations in price are ignored if they do not reflect in the bigger picture. Position trading has a solid risk-to-reward ratio and is generally used for long-term investments.

If you are looking for positive returns and sound investment strategies with high yields that are not based on the “trend du jour,” reach out to the investment team at Evolt Capital today.