The Foreign Exchange Market Analysis Report
There is increased activity in the global forex market. Despite the on-going 2019 coronavirus crisis (COVID-19), traders are looking for new ways to increase profit online. In response to this, various online investment tools and platforms have started to appear online, aiming to improve trading capacity and monitoring capability.
What is Forex?
Forex or Foreign Exchange (FX) refers to a type of trading that occurs across different currencies and markets. Compared to other types of financial exchanges, Forex is deemed to be the most stable because it has the busiest traffic with an estimated total of more or less $4 trillion daily transactions. It is also considered the most liquid since Forex utilizes no centralized governing body with transfers occurring through brokers, banks, financial institutions, and dealers.
Trades happen throughout the day, five days every week. It closes on Saturday mornings and resumes again on Mondays. This schedule allows traders to make the most of the business week to enact profitable exchanges.
Major Currencies
In Forex, eight currencies are exchanged in huge volumes. Hence, they are referred to as Major Currencies. They are the following:
- USD (US Dollar)
- GBP (British Pound)
- EUR (European Euro)
- JPY (Japanese Yen)
- CHF (Switzerland Franc)
- CAD (Canadian Dollar)
- AUD (Australian Dollar)
- NZD (New Zealand Dollar)
Currency Pair
One of the essential qualities of Forex is the Currency Pair. Traders who hold different currencies pair off to do an exchange.
Exchange Rate
The amount by which one currency is traded for another is termed as the Exchange Rate. The exchange rate is dependent on the current rate provided within a specific market. Profits are, then, made when traders do several exchanges across markets, days, and timeframes.
For instance, one trader has an amount of USD that he wants to trade for GBP. The trader, then, finds the current exchange value for both USD and GBP. The amount of GBP he makes out of the exchange shall be based on the current rate in the specific market.
If he wants to gain more profit for his money, he may want to find another market with a higher exchange rate for USD. He trades his USD for GBP in that particular market on that specific day and time frame, taking advantage of high exchange rates. Then, he waits for a change in the exchange rate and trades his GBP for another currency. He enacts multiple exchanges across markets and currencies, taking advantage of the high and low exchange rates that may change from day to day — and even hour to hour.
Forex Market Today
During the past months, forex trading has been profoundly affected by the present COVID-19 pandemic. Due to the inevitable lockdowns and quarantine protocols initiated by most governments worldwide, financial conglomerates had to reduce business hours and enact various mitigation techniques to limit the spread of the virus among employees and clients alike. Medium and small establishments were forced to close or even declare bankruptcy. Work-from-home became the sudden norm, and physical trades were significantly decreased to a minimum.
These unfortunate measures and events greatly affected not just the whole business world but included Forex trading as well. The said unprecedented catastrophe resulted in massive unemployment and less spending capacity. Hence, the Forex market became unstable, and a global recession is still an imminent threat. Less liquidity is observed, and an increase in volatility is seen.
Traders are now more inclined to hold on to their money and conduct low-risk investments, focusing more on the necessity of in-depth monitoring tools and analysis reports. The internet is brimming with increased online trading activity, and developers are pressured to provide more ways to ensure forex trade security.
Trading Strategies That Can Be Used In Forex
The necessity to conduct trade despite the on-going threat of COVID-19 is a significant concern. To prevent the collapse of different markets worldwide, the internet has become the primary alternative for various financial activities, including Forex.
OTC Exchange
Various over-the-counter platforms have become trending meccas for traders, especially because exchanges do not follow any centralized authority. Because OTC trades happen over a decentralized or open market, exchange rates do not support any general list. Traders merely agree on preferred values, and transactions occur quickly.
In place of the current health and economic crises, OTC exchange has become a popular alternative. Faster transactions are conducted via different trading platforms that offer liquidity at a premium.
Forex Derivatives
FX derivatives trading, another useful type of trading during the present COVID-19 situation, relies on the frequent fluctuations of exchange rates in the market. Traders can either Call (buy) or Put (sell) an asset within a given timeframe, which could be within a minute up to an hour. A “Call” is placed when rates are predicted to rise while a “Put” is used when rates are forecasted to fall.
In times of heightened volatility, FX derivatives allow traders to execute decisions based on their predicted rise and fall of exchange rates in the market.
Core FX Strategies
Of course, the forex trade mainstays still use these effective strategies that require knowing when to Call or Put an asset.
Trend Study
Following the rise of COVID-19 transmission globally, the need to analyze its effects on specific markets should be a given. A trend study refers to analyzing the different trends occurring within a given market and capitalizing on the said trends. Currency pairs may either go on a Bullish (upward) or a Bearish (downward) trend. Traders, then, monitor the specific currency pair, relying on the predicted direction that the said pair is taking and making profits thereof.
Range Study
During a range study, traders closely monitor the Upper and Lower Limit of a specific currency, capitalizing on the said fluctuations. The said currency is purchased during its Lower Limit and sold during its Upper Limit. The point, however, is to analyze the parameters of the said fluctuations. The timeframe of the low points (low price), as well as the high points (high cost) of a particular currency, are significant factors for effective trade. The difference between its high and low prices must also be noted.
Breakout Study
Nevertheless, there are instances when prices for a particular currency break out of a sideways trend. This study, then, capitalizes on the asset’s Breakout Point. The breakout point is defined as the point where the price goes beyond either the upper or lower threshold of a predicted range.
Using the same buying-low and selling-high technique, traders can increase profits by utilizing a reliable and systematic approach in dealing with the price fluctuations.
Summary and Outlook Trend for Next 5 Years
Despite the increased volatility brought about by the present pandemic, trading is still a rampant activity. The internet is deemed to be the most effective alternative to perpetuating trade due to the necessity of social distancing protocols that mitigate rapid COVID-19 transmission.
Trading platforms are continuously strengthened, stabilized, and developed to guarantee secure and easy online transactions while the development and utilization of substitute currencies that make use of decentralized financial systems are increasingly viable options, as well.
Nevertheless, traditional and core FX strategies are still bankable overtures, especially with the advent of various FX tools made available by multiple trading platforms. These monitoring tools are deemed to be even more efficient as they become more developed over time. Thus, trading will still be a viable activity, and the bulk of trading activities shall undoubtedly be more rampant online.
About Regal Core Markets
Established in 2017, Regal Core Markets is a company that seeks to help individual investors succeed in the capital markets. The company takes advantage of innovative trading technology as well as tried-and-tested strategies to enable strategic and secure investing. The company’s portfolio includes 200 tradeable instruments and supports bitcoin, ethereum, USD, and UnionPay funding options. Regal Core Markets averages over 40,000 trades per month with monthly trading volumes exceeding $2.8 billion.
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