When you are in the forex trade market, you will come across various strategies that can help you in monitoring the position of different currencies in the market. You can compare several currencies to pick the best pairs for your profits. Once you learn about forex trading and have tried investing your money in a couple of trades, you will develop an idea of how forex trades work. Once you get some experience in forex trading, you can start using the advanced methods to maximize your profit. These advanced strategies are only meant for those who have acquired discipline in trading by using only logic and keeping their emotions aside. Once you start seeing the logic irrespective of your gut feeling, you can use the advanced strategies that are mentioned below to do forex trade the right way.
Hedging is a tested and proved strategy to reduce the risks in forex. It uses a risk management tool which limits the exposure to risks in everyday business. Hedging is done by taking both sides of a trade at once. You will need to begin a long and short position on a single pair. Traders also resort to trade two different currency pairs while completing on one hedge. This way, hedging can reduce major risks in forex for the traders.
Position trading depends on how much exposure a currency pair gets. This can be helpful in capturing the short term market. Position trading demands you to stick to certain positions for several days using technical and fundamental analysis. Once you arrive at a decision that seems profitable, you can take out your investments. But it requires patience as the long-term positons of the short-term market can instantly give away huge profits.
Scalping is a method of short-term trading with higher leverages. The trades can be for as short as a second or can last for hours. The best way to conduct such trades is to use news release along with other supportive technical conditions. Scalping is a good strategy for beginners but can sometimes be a quick profit at advanced levels. This strategy is also quite risky, and if you do not have the right tools or discipline, you will face losses sooner than you expect. Most of the scalping trading is done by day traders who do not seek any long term profits.
Trading forex options
Forex Options are agreements to purchase a currency pair for a predetermined price based on a specified future date. This means that if you invest in one long EUR/USD pair at 1.40 and there is a chance that the price will fall to 1.38 in next 24 hours, you can put a stop at 1.3750 to control the risk of deeper reaction. This way, you set up a potential loss of 250 pips, but you still prevent further losses. After that, you decide to use forex to cover the losses and purchase a short at 1.3750. If the EUR/USD goes and never comes to 1.3750, you lose the premium you paid for the currency option. But, if the EUR/USD falls to 1.3750 or below, you will receive profits from your option. The options profits can help in recovering your losses on long term trades.