Forex trading is the most traded market in the world where conversions from one currency are done to another at an agreed price. The normal daily trading volume is around $5 trillion which can make price movements of some of the currencies volatile.
Currencies are traded in pairs and some of the major currency pairs traded worldwide represents some of the world’s largest economies. Popular currency pairs that are traded in high volumes are EUR/USD, USD/JPY, USD/CHF and GBP/USD.
Whatever currency you deal in, it is important to understand them well before you take any big steps. Here are some strategies for those who wish to trade the AUD.
AUD Trading
The Australian dollar (AUD) is one out of the five most commonly traded currencies in the forex market.
In forex trade, the link between AUD and USD is considered as one of the most volatile. The high levels of volume, volatility and profitable prospects are due to the differences in the interest rates of both currencies.
The popularity of this currency pair has increased in recent years; this is mainly due to Australia’s prominent role in the international commodity markets.
Australia is abundant in natural resources such as coal, nickel, iron ore and gold, and the mining sector represents about 5% of the GDP, whereas, 12% of the GDP comes from agricultural products like wheat, canola, cotton, sunflower, barley, etc.
This currency pairing represents a significant share of daily trading and is popular amongst both experienced traders and newbies.
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Different Strategies For AUD Traders
So what are the best strategies for the AUD traders? There is no ‘one size fits for all’ strategy available for the AUD/USD currency pair, however, here are three of the basic strategies for trading the AUD. If you have a forex trade account, regardless of whether you are a new or an experienced AUD trader, use these three simple strategies to take advantage of the fluctuating prices.
1. AUD/USD Scalping Trading Strategy
Scalping technique is a trading strategy where trading is done at lightning speed. Here, profits are made from small price changes and are done in quick successions and when an opportunity lasts. For the AUD/USD currency pair, fast trading is one of the methods that work best.
Trading takes place, quickly, in 5 minutes at most, by limiting market exposure and quickly opening and closing positions. The perks of scalping are that there are many opportunities available. Though your earnings will be small, the accumulation of the profits will make you take home large sums.
If you like high-speed trading, this is the technique that you should follow. However, this strategy demands discipline, determination, and analytical expertise; this is because one large loss could eliminate the profit made from many small gains.
As an AUD trader, if you are scalping, then you need to have a strict exit strategy. You will also need to have the right platform with a live feed and a direct-access broker, and of course the mindset to respond quickly to market movements and grab the opportunities.
2. AUD/USD Day Trading Strategy
The second strategy that works for the AUD/USD pair is the day trading strategy. As the name suggests, the trading takes place within a single trading day. It can also take place multiple times over the course of a day. It is similar to scalping strategy, but here the trading time is longer.
Day trading requires an in-depth understanding of how the markets work and various strategies for taking advantage of small price moves. This strategy can be profitable if you are an expert. If you are a newcomer, without an understanding of market fundamentals, you could often lose money
Whilst forex trading is available for 24 hours, the best time to day trade the AUD/USD currency pair is during the Australian working hours and half-way through the Asian trading session. Intraday volatility spikes are also seen during the US trading hours when the US economic indicators are released. You should keep an eye on the economic reports and consumer inflation data that could influence the volatility and volume needed to generate substantial profits.
3. AUD/USD Swing Trading Strategy
Unlike the first two strategies, this strategy is one of the most popular forms of active trading and takes place for more than a day, sometimes continuing on for many days or even weeks. If you are someone who is not available all day, you could try this strategy by maximising the short-term profit and capturing the bulk of market swings. The gains are substantial because the strategy is long term. However, as you may not close your positions on a daily basis and hold onto them for weeks or months, the trade positions are subject to unpredictable overnight and weekend market risks. There are also chances of large losses in case of abrupt market reversals.
But an advantage is that due to the long-term nature of the trade, the swing trading strategy relies on technical and fundamental analysis and multi-day chart patterns.
Open A Demo Forex Trading Account
If you are new to forex trading or have just started your forex trading account, it is always better to open a demo account first and practice the trade.
You do not have to deposit money in your demo forex account. First, make yourself familiar with the trading practices and platforms. There is NO risk involved and you will get an opportunity to improve your trading skills and forex trading performance without investing large sums of money.
Once you have practised enough on your demo forex trading account, you can open a live account and start trading.
Conclusion
Whatever your AUD/USD trading plan involves, from day trading to scalping to swinging, employ your strategy at the most effective time. Monitor the commodity market, take into account the latest news updates and train yourself to be capable of reading the charts, data and market indicators to help you make informed decisions.
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Read More:
What Are The Most Volatile Currency Pairs?
Forex Trading Australia - The Ultimate Beginner’s Guide