What is your strategy in 2019 to profit from the FX market?

By Jamie Hill - 7 January 2019

Expert Voices

At end-2018 the question no longer is whether you want to enter FX trading. The question now is more about which forex trading strategy you need to adopt in 2019. The discourse has moved from football to which trading pairs will dominate the forex landscape in 2019.

Powered by innovations in electronic trading, the forex (FX) trading market has bloomed into a global business that turns over $4 trillion a day, based on statistics of the Bank of International Settlements (BIS). The BIS goes on to elaborate that high-frequency traders, banks trading on behalf of big dealers and online trading by retail investors have powered the growth of online trading in forex. Notably, an important structural change that has spurred this growth is electronic trading. Increased transparency and ease of access offered on the electronic platforms are factors that have appealed to a larger customer base and drawn lay people to forex trading. Further, the convergence of technologies and the emergence of the smartphone as a trading device have given traders the ultimate freedom and convenience to trade from anywhere and liberated them from laptops or computers.

What attracts people to forex trading

People venture into FX trading for two reasons. Some take to forex trading for the sheer love for excitement and to be part of the thick of the action. They thrive on action and live and breathe forex trading. Such traders may not employ specific strategies and they would flow with the trends as they unfold every day.  The second category comprises traders who have chosen forex as an avenue through which they can make a profit. These traders believe in deep analysis and have formulated strategies for trading in the spot market or hedging in the futures market. This class of traders believes that success in forex trading depends on an understanding of the geopolitical events, trade wars and economic factors. This class of traders has gathered acumen over the months and years to interpret events such as a Central Bank’s monetary policy stance or economic factors such as a country’s inflation, trade balance, gross domestic product, employment data, and non-farm payroll (NFP) data. Based on these events, traders assess the relative health of an economy. Given that forex trading is done in pairs, traders undertake an in-depth analysis of both the countries in the chosen pair.

Which forex pairs to choose for 2019?

Millions of researchers, analysts, and traders around the world are crunching numbers and gleaning reports to come up with a strategy for choosing forex trading pairs in 2019.  You have already realised that the despite the massive trades and huge turnover, forex remains a very tricky market and you should have a clear vision.  You are aware that your success depends on your predictions and your ability to be ready for negative surprises, which could be in abundance given the global gamut of forex operations.  

For forex traders, 2019 was an interesting year from a market perspective, with an escalating trade war between the US and China being one of the most defining events. The other important events were the implosion of the Venezuelan and Turkish economies, which threatened to destabilise currencies correlated to these countries.  In the UK even as Teresa May survived amid chaos, the Brexit challenge continues and any prediction is fraught with uncertainty. The World Bank expects global GDP to dip slightly by a basis point to 3.0% in 2019 from 3.1% in 2018.

In this broad landscape, analysts indicate that USD/GBP and USD/Euro, two of the statistically dominant currency pairs, will continue to remain in the spotlight and may never leave the traders’ terminals. The most commonly followed strategy is to choose outperformers and check lead indicators based on which USD/GBP and USD/Euro form the popular choice because they are highly liquid and involve large transactions. However, 2019 may prove a dynamic year and new protagonists from the emerging markets may also dominate the landscape.

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