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Listen to “How to Trade the Currency Market (Forex)” on Spreaker.


Hi, guys. Andrea Unger here, and we’ll talk a little bit about currencies.

Talking about currencies, the first thing is: shall I work on futures, on currencies or on Forex? There are pros and cons for both. On Forex, if you are not extremely capitalized, you have opportunities to trade because of the scalability—the downsize scalability on Forex—you can trade with mini-lots, micro-lots; so, you can really adapt the position to the level of capital you have on your account with no problem. You can’t do that on futures, of course. You can trade one contract, not 0.1 of it. But the futures is a regulated market. Forex is over-the-counter, and somebody might feel uncomfortable in trading on an over-the-counter market, but it’s up to you to decide.

In any case, this is the list, the first list that comes into my mind on currency futures. Eurodollar, British Pound future, Japanese Yen future, Australian dollar, New Zealandese dollar, Swiss franc, and Mexican peso. The most important and easy to trade in a systematic way are obviously Eurodollar and British Pound; they adapt to both trend-following and counter-trend strategies. I can tell you that in the latest years, they became a little bit more difficult to trade anyway. So, stay tuned on them, but consider that it’s easier to find good models that worked in the past and that is harder to produce profits today.

In terms of stops, normally if you develop intraday or overnight, you should stay somewhere around 100 pips—or 100 ticks if you talk about futures—which is a reasonable level. And you go down to 70 up to 130, but the area is around 100 pips. So, consider that, obviously, when you develop strategies.

Japanese Yen is an interesting market because sometimes it rises very, very largely. If you’re in the right position in that moment, you obviously enjoy it very much; but it’s not easy to find good models. Mostly, you should look for counter-trend stuff, but in any case, it’s not the easiest market to develop on.

A bit easier is the Australian Dollar for trend-following. It became liquid enough now, so you can easily access it with no fear of not getting enough players. The same thing on New Zealandese dollar—in terms of liquidity it became better, but it moves worse than the Australian dollar. So, it’s more difficult to find working models on it.

The Swiss franc has no cap anymore with Eurodollar, so actually, it’s free. But it’s an interesting diversification in an alternative to Eurodollar. Find some models: counter-trend, trend following, but if you trade the Eurodollar, I would not include Swiss franc or vice versa.

The Mexican peso is a nice market—very liquid actually—future, but it’s difficult to develop; it’s difficult to find a working model that fits that market or find something where the market responds in a positive way to our input. So, it’s here on the list because it’s important, but I would not consider it to develop too much because it’s not easy.

On the other side, another thing that you see, this is a limit in this. On Forex, you have many more pairs. Actually, think about Euro/Yen; there is no Euro/Yen here. Maybe there is a future but I’m not sure about that, but I think it’s not even considered in terms of liquidity. But in any case, on Forex you have many more crosses. So, you can actually diversify that in a completely different way, and you have other kinds of opportunities to develop. So, that’s another reason why you could prefer Forex to futures. Again, if you feel comfortable in trading over-the-counter, fine; you can do it. But these are the regulated markets, these are the markets I personally focus on, and I think you have enough also here, even a little less than what you find on Forex.

But in any case, apart from the currencies, there are many other markets. You find them in our videos: some are there, some more are to come. Stay tuned. Ciao.

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