Forex trading, or foreign exchange trading, is a big and fast-moving market where you can trade currency pairs. While the focus is on major pairs and well-known strategies, there are many hidden gems that can be exciting and profitable.
In this article, we’ll explore some of the unique aspects of Forex trading, including niche strategies, geopolitical events, and technology.
Table of contents
Minor and exotic pairs
While major pairs like EUR/USD and GBP/USD get all the attention, minor and exotic pairs offer opportunities.
These pairs have higher volatility, which means they have more profit potential. For example, pairs like the Singapore Dollar (SGD) against the Japanese Yen (JPY) or the South African Rand (ZAR) against the US Dollar (USD) can move significantly due to regional economic factors.
Emerging markets
Emerging market currencies can be interesting for traders looking to diversify their portfolios. These markets have higher interest rates, which attract foreign investment. However, they are also more prone to economic and political instability.
For example, Turkey's Turkish Lira (TRY) has been very volatile due to political changes and economic challenges. This volatility creates both risks and opportunities for traders who can navigate these complexities.
Niche strategies in Forex
Carry trade
The carry trade is a strategy where you borrow in a currency with a low interest rate and invest in a currency with a high interest rate. While it’s commonly used with major currencies, applying this to exotic pairs can yield higher returns.
🇯🇵 🇿🇦 Borrowing in Japanese Yen (which has a low interest rate) and investing in South African Rand can be profitable, especially when the interest rate differential is significant. However, the risks are higher due to economic volatility in emerging markets.
Algorithmic and high-frequency trading
Technology has made algorithmic trading accessible to retail traders. This involves using computer algorithms to execute trades based on predefined rules.
High-frequency trading (HFT) is a subset of algorithmic trading where you execute a large number of orders at extremely high speeds.
While HFT requires sophisticated infrastructure, even simple algorithmic strategies can help you automate your trades and remove emotional biases.
JustMarkets: A platform for everyone
Looking for a forex broker that truly understands and supports its traders? JustMarkets is the one.
They offer a range of accounts, from beginner to professional, including the Standard Cent Account and the Raw Spread, which has some of the tightest spreads in the industry.
JustMarkets isn’t just about low costs; they provide robust tools on both MetaTrader 4 and MetaTrader 5, so you can trade how you want.
What we like about JustMarkets is that they genuinely care about their traders’ success. They offer excellent educational resources, webinars, and tutorials for both newbies and pros to improve their skills. The platform is user-friendly and suited for every level of trader.
Geopolitical events
Geopolitical events can move the Forex markets and currency values quickly. Brexit was a significant event for the British Pound (GBP) and traders who were prepared for it.
🇺🇸 🇨🇳 Trade tensions between the US and China have affected the Chinese Yuan (CNY) and other currencies. If you stay informed about geopolitics, you can trade the affected currency pairs.
Risk management: Next level
Risk management is key in Forex trading. While stop-losses are a basic tool, you can use more advanced strategies to manage risk. Diversification, for example, involves spreading your investments across different currency pairs to reduce exposure to any one market.
Another strategy is using options to hedge against adverse movements. For example, buying a call option can protect against a sudden drop in a currency’s value.
Practical example: Hedging with options
Let’s say you’re trading the Brazilian Real (BRL), which can be very volatile due to political uncertainty. By buying a call option, you can lock in a price at which to sell the currency and limit your losses.
This is particularly useful during times of economic instability or political events that can drastically move currency values.
Continuous learning
The Forex market is always changing and is influenced by economic data, political events, and technological advancements. To stay ahead, traders need to continuously learn and adapt their strategies.
👉 This means keeping up with global news, understanding economic indicators, and being open to new trading technologies.
Conclusion: Why try Forex trading
Forex trading gives you access to a global market. Whether you’re interested in major currencies or want to try out minor and exotic pairs, there’s plenty to explore.
Platforms like JustMarkets have the tools and resources to get you started, from educational materials to advanced trading platforms.
By understanding the market and managing risk effectively, you can navigate this fast-paced environment and make significant profits.
