Foreign exchange trading methods and strategies
Foreign exchange trading is short-term and the trading cycle is intra-day. People often say that single-line, ultra-short-line, high-frequency trading aims at a very high winning rate, and the accumulation of winning rate in a short time will produce considerable benefits.
Mid-line foreign exchange trading, the trading cycle varies from a few days to ten days, based on basic analysis, analyzing the medium-term market supply and demand and mood; With the help of technical analysis, find the entry point and exit point.
Forward foreign exchange transactions, with a trading cycle of weeks, analyze long-term influencing factors such as a country's political and economic situation, trade data and monetary policy.
According to experience and analysis, retail foreign exchange should not be traded too much in the short term, because the daily average volatility of foreign exchange is low, and its transaction cost is too high compared with the volatility. Because of its high leverage, short-term trading can get higher returns, but in the long run, the transaction cost of short-term trading exceeds the income, and even leads to losses due to the cost. Retail foreign exchange is also not suitable for long-term trading, because retail foreign exchange belongs to spot trading and has the cost of holding positions, while long-term trading usually uses low leverage or even no leverage. Generally speaking, after considering the transaction cost and volatility, mid-line trading is the best choice for retail foreign exchange.
The basic design method of grid strategy is to count the large-period volatility and the short-term maximum one-way volatility, and set the spacing and proportion of positions according to these two data. Its basic operation method is to add positions after opening positions to reduce the average position price, and close all positions in this direction after the fluctuation turns to a certain profit. If there is no extreme market in the short term, the grid strategy will accumulate rich profits because of its high winning rate and small profit.
Trend strategy, whose basic design method is to filter market fluctuations to reduce trading frequency and obtain trading opportunities with high odds, is characterized by low winning rate and high odds, and is regarded as a standard trading strategy in foreign exchange trading.
Hedging strategies are mostly used for statistical arbitrage. Because the correlation of foreign exchange varieties is far less than that of futures contracts, hedging strategy is an unpopular strategy in foreign exchange trading and must be done by a team with excellent quantitative skills.
Seven methods of foreign exchange trading
1, spot foreign exchange trading method
Enterprises can eliminate the losses caused by exchange rate fluctuations within two days by conducting spot foreign exchange transactions with the same amount and opposite direction with existing open positions (assets or liabilities exposed to foreign exchange risks due to differences in foreign exchange assets and liabilities). Since spot foreign exchange transactions only fix the exchange rate for delivery on the third day in advance, their hedging effect is very limited.
2. Forward Contract Law
Forward contract law is a method to prevent foreign exchange risks by using forward contracts. It is more widely used to prevent foreign exchange risks than spot foreign exchange trading. It means that importers and exporters sign forward foreign exchange trading contracts with banks to fix the exchange rate and avoid the risk of exchange rate fluctuations.
3. Currency futures contract law
Currency futures contract law refers to the method of signing currency futures contracts with banks, futures companies and other institutions to prevent foreign exchange risks.
4. Option trading method
Option trading method refers to the method that both parties sign a forward foreign exchange contract, and the option is performed or not performed at the agreed exchange rate, and a certain fee is paid to prevent foreign exchange risks.
5. Swap trading method
Swap transaction is a common transaction in foreign exchange business. It is a way for buyers and sellers to conduct spot foreign exchange transactions and forward foreign exchange transactions with the same amount at the same time. The main characteristics of swap transactions are: buying and selling at the same time, the same amount, but the term structure of the transaction is different. For example, a bank in new york bought 6,543,800 yen spot foreign exchange from a bank in Tokyo for business needs, but at the same time sold 6,543,800 yen forward foreign exchange to a bank in Tokyo for delivery three months later.
6. Foreign exchange futures: The so-called foreign exchange futures refer to futures contracts with exchange rate as the subject matter to avoid exchange rate risks. It is the earliest variety in financial futures.
7. Trading of foreign exchange options: foreign exchange options are traded in foreign exchange, that is, the option buyer obtains a right after paying the corresponding option fee to the option seller, that is, after paying a certain amount of option fee, the option buyer has the right to buy and sell the agreed currency at the exchange rate and amount agreed by both parties in advance on the agreed expiration date, and the buyer with the right also has the right not to execute the above-mentioned sales contract.