Overview
Foreign Exchange trade strategies typically begin with a theory of FX pricing, and then looks for deviations from the predicted prices.
Trade Strategies
- Technical Strategies - the tools of technical analysis have been applied to currencies in addition to other assets. In particular, trend analysis has been of some benefit, particularly for the smaller currencies, where the markets are not as efficient.
- Carry Trade - the carry trade is one of the classic foreign exchange strategies. In involves buying currencies with high interest rates, and shorting currencies with lower rates. Beyond just trading on current interest rates, the trader who can interpret central bank signals is often in a good position to trade FX.
- Macro Trends - economies that do well, in particular, those that produce quality goods and generate exports to other countries, tend to have strong currencies. A skilled analyst of the global macro economy can often use economic trends to help forecast the movement of FX prices.