Essential forex trading strategies in Singapore

Singapore has to rely on its strong trade and financial services sectors to keep its economy afloat as a small island state with no natural resources. So it’s no surprise that forex trading is one of the most popular activities here. However, forex trading is not without its risks. If you’re not careful, you can instantly lose all your hard-earned money.

That is why it’s crucial to have a solid strategy before starting trading. This article will discuss some essential forex trading strategies that every trader should know.

The carry trade strategy

It is one viral forex trading strategy used by traders in Singapore. Under this strategy, a trader buys a currency with a high-interest rate and sells a currency with a low-interest rate. The aim is to earn the interest rate differential between the two currencies.

For example, you buy the Australian dollar (AUD) against the Japanese yen (JPY). The current interest rate on AUD is 2.5%, while the interest rate on JPY is 0.1%. If you hold your position for one year, you will earn 2.4% (2.5% – 0.1%) in interest on your investment.

Of course, you will also be exposed to currency risk since you are holding two different currencies. But if you believe that the AUD will continue to rise against the JPY, you can offset this risk by using a stop-loss order.

The momentum trading strategy

The momentum trading strategy is another popular forex trading strategy used in Singapore.

Under this strategy, a trader buys a currency showing signs of strong momentum and sells a currency showing weakness.

For example, the EUR/USD pair is currently trading at 1.2500. You believe that the EUR will continue to strengthen against the USD, so you decide to buy the pair. However, you also place a stop-loss order at 1.2450 just in case the EUR starts to weaken against the USD.

If your deal goes through, you will make a profit when the EUR/USD pair hits 1.2600.

However, if the EUR starts to weaken against the USD and your stop-loss order is executed, you will only lose 50 pips.

The news trading strategy

The news trading strategy is another popular forex trading strategy used in Singapore.

Under this strategy, a trader buys or sells a currency based on economic news releases.

For example, let’s say that the U.S. non-farm payroll data is scheduled to be released later in the day. If you believe that the data will be better than expected, you can buy the USD against a currency like the JPY. Conversely, if you believe that the data will be worse-than-expected, you can sell the USD against a currency like the JPY.

The trend-following strategy

The trend-following strategy is another popular forex trading strategy used in Singapore. Under this strategy, traders buy or sell a currency based on whether the price is trending up or down.

For example, let’s say that the EUR/USD pair is currently trading at 1.2500, and you believe it will continue to move higher. You can buy the pair and place a stop-loss order at 1.2450. If your deal goes through, you will make a profit when the EUR/USD pair hits 1.2600. However, if the EUR starts to weaken against the USD and your stop-loss order is executed, you will only lose 50 pips.

The position trading strategy

The position trading strategy is a longer-term forex trading strategy used in Singapore. Under this strategy, a trader buys or sells a currency and holds the position for an extended period.

For example, let’s say that you believe that the EUR will continue to strengthen against the USD over the next few months. You can buy the EUR/USD pair and hold it for several months. If your deal goes through, you will make a profit when the EUR/USD pair hits 1.2600.

In conclusion

These are just a few of the many different forex trading strategies used in Singapore. While there is no one-size-fits-all strategy, these five strategies are popular among traders in Singapore. Check out Saxo for more info.