Skip to main content

A Quick Guide to Trading Forex

3 minute read

Joshua Williams

By Joshua Williams

Many people have turned to Forex, or foreign exchange, trading to earn money for the future. Since the stock market has shown a new generation of investors that it does not always produce healthy returns, Forex trading has become particularly popular.

Your Forex currency strategies, however, should differ depending on the economic environment.

Forex Currency Strategies During a Recession

The basic idea behind Forex currency trading is to invest in currencies that are gaining value. This typically means that you will avoid the currency of countries going through a recession in favor of those that are growing.

Currently, this could mean dropping your interest in American Dollars and Euros while you concentrate on the Chinese Yuan. This strategy has worked for many people, but it does not necessarily imply that the USD is a bad bet. Many economists think that the U.S. economy will maintain its superiority despite the present economic downturn that has devalued its currency.

Forex Currency Strategies Based on Current Events

Global events can quickly alter your Forex trading strategies.

Natural disasters, for instance, can destabilize a country’s economic situation, as well as the health of its people. As areas recover from disasters, they have to focus their money on rebuilding infrastructure. This does not typically lead to economic growth because the country has to concentrate so much of its resources on simply rebuilding what they once had.

Similar situations can arise from wars, political upheaval, and international politics.

Making Quick Forex Trades on Smaller Currencies

Some people spend most of their time eyeing the world’s biggest currencies such as the EUR, USD, and JPY. However, there is a lot to be said for paying closer attention to smaller currencies. The South Korean Won and Singapore Dollar, for instance, are not as closely tied to the U.S. economy as the EUR. Therefore, focusing on these less popular currencies can earn a solid return even when the U.S. economy takes a turn for the worst.

The value of these currencies can change rapidly, so it makes sense to pay close attention to them and trade on a regular basis. Small changes can have a big effect on how much money you get from your investment, so you have to be prepared to make fast decisions.

Long Term Forex Trading Strategies

There is a school of thought that believes now is a great time to invest in the U.S. economy. This is since the value is undervalued on the world market.

There could be some truth to this, but investing in USD is typically a long term investment strategy. You buy as much U.S. currency as you can and then wait for the country’s economy to recover. You can also apply this long term strategy to other countries that are experiencing economic downturns.

Is There a Perfect Forex Trading Strategy?

Some investment companies will tell you that they have the perfect Forex trading strategy that makes money every time. As with all types of investments, though, there are no guarantees.

Many of these investment companies use proprietary software that analyzes complex data to determine what actions their clients should take. They often produce good returns, but it’s simply impossible to create a foolproof plan that earns money every single time.

Joshua Williams

Contributor

Joshua is a freelance writer with years of experience blogging about business and finance, and a whole host of other things too. When he's not writing, he enjoys camping with his dog, a golden retriever named Oakley.

Explore

The Top Online Stock Trading Tools and Resources for Serious Investors Investing

The Top Online Stock Trading Tools and Resources for Serious Investors

In the dynamic, fast-paced world of stock trading, having access to the right tools and resources can play a decisive role in determining the outcome of your investment journey. The difference between success and setbacks often hinges on the tools you have at your disposal. Given the sheer volume and variety of options available, it’s […]

Read More about The Top Online Stock Trading Tools and Resources for Serious Investors

3 minute read

Required Minimum Distribution: Everything You Need To Know Investing

Required Minimum Distribution: Everything You Need To Know

After decades of productivity and setting aside a portion of your paycheck, you eventually hit retirement age. Now you need to plan how you will make withdrawals from your savings to meet your living expenses in retirement. The IRS requires retirement account holders to start taking mandatory withdrawals from their qualified retirement accounts once they […]

Read More about Required Minimum Distribution: Everything You Need To Know

6 minute read

What is Socially Responsible Investing (and Should You Do It)? Investing

What is Socially Responsible Investing (and Should You Do It)?

There’s one very specific thing I remember about my dad’s views on investing. He told me multiple times that he simply wouldn’t touch certain investments, out of principle alone. For starters, he refused to ever short a stock. That’s because shorting a stock is basically betting on someone else to fail, meaning you profit off […]

Read More about What is Socially Responsible Investing (and Should You Do It)?

8 minute read

What Is Stablecoin? (And Should You Invest In It?) Investing

What Is Stablecoin? (And Should You Invest In It?)

In the year 2021, the price of Bitcoin has gone up and down by tens of thousands of dollars. This type of volatility can be attractive to those looking to make a quick buck by buying the dip. However, for many conservative investors, this behavior has made getting into cryptocurrency a non-starter. If you fall […]

Read More about What Is Stablecoin? (And Should You Invest In It?)

7 minute read

Moves To Make If You’re Worried About a Stock Market Crash stock market crash Investing

Moves To Make If You’re Worried About a Stock Market Crash

We wouldn’t blame you for being worried about a potential stock market crash right now. The Delta variant of COVID-19 is currently ripping through the United States (and other parts of the world). Chinese real estate behemoth Evergrande is tanking, threatening to take portfolios around the world with it. Then there’s the issue of the […]

Read More about Moves To Make If You’re Worried About a Stock Market Crash

6 minute read

See all in Investing