Forex Trading Trends and Profitable Approaches for 2024

The year 2024 presents many opportunities for success for foreign exchange (forex or FX) traders who want to capitalize on market trends and boost their earnings. The forex market is constantly changing, so we’ve put together this guide to help traders seize opportunities and maximize their profits.

Forex Market Trends and Forecast

Slowed Volatility

The forex market was predicted to see increased fluctuations in 2024 due to tensions, changes in economic policies, and emerging global crises. However, currency markets are currently stagnant, with the Deutsche Bank’s currency volatility index (CVIX) reaching low levels that were last observed in 2019. Both historical and anticipated measures of volatility have decreased recently as major central banks maintain a course limiting the movements that FX traders typically rely on.

Regardless, central banks are gradually becoming more active. The Swiss National Bank was the first central bank to decrease borrowing costs during this cycle in March. The Federal Reserve, European Central Bank, and Bank of England are expected to follow suit this year.

The U.S. yields increased recently because investors are less sure about the Fed lowering rates, especially after seeing newer releases. Eurozone bond yields have mostly mirrored this trend.

Divergence among central banks is one factor that could potentially lead to volatility, but this is not expected to occur in the first half of the year.

Another factor to consider is the upcoming U.S. elections and Donald Trump’s potential impact. Trump has recently mentioned the possibility of implementing a 10% universal import tariff. He even hinted at imposing levies possibly reaching 60% on goods coming from China. These tariffs could potentially strengthen the dollar while derailing the euro and the Chinese yuan.

Rising Inflation

Many countries are facing challenges with rising inflation rates, negatively impacting the value of their currencies. Traders must keep themselves updated on inflation figures as they serve as indicators of how a currency may perform.

For instance, the March Consumer Price Index (CPI) in the United States showed higher-than-expected inflation rates for both core and headline categories, coming in at 3.8% and 3.5%, respectively. Even a slight uptick in inflation can indicate sustained activity, leading traders to consider its implications for decisions made by the Federal Reserve regarding interest rates and potential trading opportunities in the foreign exchange market.

Changes in Trade Strategies

Modifications in trade strategies, like tariffs and trade deals among economic players, will impact currency values in 2024. For example, Mexico has emerged as the leading trading partner for the U.S. amid tensions with China. Consequently, many prominent companies are now looking into sourcing options in countries like Chile, Colombia, Costa Rica, Brazil, and Mexico. Notably, the Mexican peso continues to strengthen its position against other currencies — even the dollar at 16.44.

Political Stability and Economic Policies

Traders need to monitor events, elections, and shifts in government strategies, as these factors can have swift and significant effects on the forex market. The ongoing conflicts between Israel and Hamas, as well as Russia and Ukraine, are creating an atmosphere of increased risk for the global economy. This heightened risk is driven by pressures resulting from reduced trade activities in the Middle East and Europe. Consequently, we are witnessing unexpected changes in commodity prices, rising energy expenses, declining consumer confidence levels, and subdued demand.

Trading Strategies To Maximise Profit for 2024

Scalping

Scalping involves engaging in trades to secure profits within a short period. It works best in times of volatility, and traders must actively seek out these opportunities. Various economic and geopolitical factors can trigger these conditions, making it crucial for traders to understand how they directly impact trading decisions and risk management.

Carry Trade Strategy

The carry trade strategy is most appealing when volatility is low. The first step in a carry trade is to see which currency has a high interest rate and which has a low one.

For example, traders can borrow money in JPY, which has a low-interest rate, and put it into AUD or NZD, which has a higher interest rate. This takes advantage of the interest rate difference. You can buy NZD/JPY or AUD/JPY to do this easily. You can find updated interest rates for popular currencies on websites like TradingView. Keep checking these rates because they can change anytime, and it’s good to look at the central bank websites to stay updated.

These trades might not give big profits on their own, but many people use leverage, which multiplies their potential profits. The main goal for carry traders is to earn from the interest rates; any extra money from the currency value going up is a bonus.

Swing Trading Amid Political and Economic Changes

Swing trading can serve as an approach for traders aiming to benefit from shifts in momentum over multiple days or weeks. It necessitates alertness but does not require the short time frame associated with day trading. Traders may maintain positions for days or weeks, taking advantage of changes in trade agreements or policy adjustments. For instance, one could engage in trading USD/CAD amidst evolving trade relationships between the U.S. and Canada. A key advantage of swing trades in forex trading is its flexibility regarding time commitments.

News Trading

The forex market reacts to news updates, and economic data drives short-term fluctuations. When trading the news, investors typically seek opportunities during periods of market uncertainty before news releases. This strategy is suitable for short-term trades lasting within a day or longer-term positions held over days.

Once the news is released, observe the market fluctuations closely. Execute trades when the price surpasses or falls below specific thresholds predetermined for the day, week, or month. If the price exceeds your designated threshold, then you should buy.

Adapting to Changing Trade Strategies

Every market presents its own challenges, but they can always be mitigated by staying informed. These trends and strategies offer opportunities to profit from the dynamic FX market. Remember always to use technical analysis in your approaches.