The world's largest financial market is right in front of you | 5 key winning strategies for forex trading

Why Has Forex Become a New Favorite in Investment?

The stock market fluctuates wildly, gold repeatedly hits new highs, and bonds also attract significant capital inflows. But in terms of trading volume, these all pale in comparison to the global foreign exchange market. With over 6 trillion USD in daily trading volume, forex trading is the world’s most active financial market. More importantly, forex is not just an investment tool; it’s involved in travel currency exchange, overseas shopping, international trade—everyday life is full of it, making it easy for ordinary people to participate.

In recent years, mature market currencies have also experienced intense volatility, creating continuous profit opportunities for savvy investors. Unlike stocks, which require research into company fundamentals, the logic behind forex price movements is relatively clear—by understanding each country’s interest rate policies and monetary policy trends, you can roughly predict the direction.

What Is the Spread? How Can You Profit From It?

The essence of the spread: time difference and price difference

Spread simply refers to the difference in exchange rates for the same currency at different times or through different trading channels. Retail investors most commonly profit by “buy low and sell high” or “sell high and buy low” to earn this spread.

Suppose you expect the euro to appreciate, so you buy 1 standard lot (100,000 units) of EUR/USD at an exchange rate of 1.0800. When the rate rises as expected to 1.0900, you close your position immediately, then:

Profit = (Close price - Open price) × Trading volume
= (1.0900 - 1.0800) × 100,000 = 1,000 USD

A mere 100-point fluctuation can bring you a net profit of 1,000 USD. That’s why so many people are fascinated by spread trading—small movements can turn into substantial gains.

Comparison of risk and reward among three ways to profit from spreads

Low-risk option: Bank foreign currency fixed deposit

Open a foreign currency account at a bank and deposit at the official exchange rate. USD fixed deposits are the most popular due to high interest rates and wide application; South African rand deposits attract investors because of much higher interest rates than TWD.

The advantage of this method is: low threshold, low risk, mainly earning interest. But the obvious downside is—poor flexibility, early withdrawal results in losing interest, no short selling, and cannot fully leverage market volatility. If you only want to earn interest rather than spreads, this is fine; but if you want to actively profit from spreads, consider more flexible options.

Reminder: Currently, the USD faces depreciation risk (Federal Reserve rate cut cycle), so purely fixed deposits may earn interest spread but lose on exchange rate.

Moderate-risk option: Foreign currency funds

These funds combine gains from exchange rate fluctuations with the growth potential of the underlying assets. For example, buying a JPY-denominated Japanese stock fund allows you to profit from JPY appreciation via exchange rate gains, and also from stock price increases—truly a “double profit.”

Compared to fixed deposits, foreign currency funds offer more growth potential but require more market research.

High-yield option: Forex margin trading

Trade on leverage through brokers (banks, securities firms, or CFD platforms). Investors only need to pay a margin deposit to conduct large trades far exceeding their capital. Leverage can range from dozens to hundreds of times—if correct, profits multiply quickly; if wrong, capital can be wiped out rapidly.

Though risky, experienced traders see high leverage as a tool for rapid capital growth. For example, USD/JPY with 200x leverage on platforms like Mitrade—if you caught the surge in August last year (from 161 to 141), returns could be several times your investment.

Advantages of Forex Margin Trading

Lower trading costs

Banks’ buy-sell spreads are usually 0.3%-0.47%. For example, the spread for TWD/USD can be 0.47%, and short-term interest rate changes may not offset this cost.

In contrast, on platforms like Mitrade, the EUR/USD spread is only about 0.0082%, negligible in practice. Even without leverage, short-term trading profits can far surpass bank currency exchange margins.

T+0 two-way trading with no limits

Margin trading supports unlimited same-day buy and sell transactions. You can go long on USD against TWD or short USD. Both directions offer profit opportunities, and trading flexibility far exceeds fixed deposits.

Leverage magnifies effects

Even tiny price movements can be amplified dozens or hundreds of times with leverage. For investors with limited capital but accurate market judgment, this is a powerful tool for rapid capital growth.

Practical Analysis of Five Major Trading Strategies

Different strategies suit different investment styles and time horizons. Choosing the one that matches you is the key to success.

1. Range Trading｜Buy high and sell low within oscillations

When exchange rates repeatedly oscillate within a certain range without a clear trend, range trading is most effective. Traders need to identify support and resistance levels and buy or sell at key points.

Classic example: Between 2011-2015, the Swiss National Bank announced it would unconditionally maintain EUR/CHF below 1.2000, leading many investors to repeatedly buy low and sell high within the 1.2000-1.2500 range, forming a clear range pattern.

Using oscillators like RSI or CCI as buy/sell signals, combined with proper stop-loss settings, can turn range oscillations into steady profits.

Risk warning: Once the range is broken, losses can be severe. Strict stop-loss execution is essential.

2. Trend Trading｜Follow the trend for the most popular approach

When the market shows a strong directional move, trend trading is the easiest and most stable method. Trading periods range from weeks to months. Traders need to confirm entry points with oscillators and set stops and targets based on risk-reward ratios.

Classic example: From May 2021 to October 2022, as the Fed aggressively raised interest rates (total hikes of 400 basis points, fastest in 30 years) while the European Central Bank hesitated, the market heavily bet on USD appreciation, causing EUR/USD to fall into a sustained downtrend. During this period, shorting the trend yielded good returns.

Trading mindset: Once a trend forms, it’s hard to change. Discipline is key—ensure profit targets exceed stop-loss levels.

3. Day Trading｜News-driven short-term opportunities

News is the secret weapon for short-term traders. Interest rate adjustments, key economic data releases, central bank decisions—these moments often trigger sharp forex volatility.

For example, every FOMC meeting can cause significant swings; CPI data, non-farm payrolls, and other key indicators can cause market shocks. Successful day traders quickly enter and exit during these times, capturing gains within 1-2 days.

Trading mindset: Be decisive. Short-term trades can turn into long-term traps; better to take small profits than hold overnight.

4. Swing Trading｜Combining technical and fundamental analysis

Swing trading lies between day trading and long-term trend trading, relying on both technical analysis and fundamental insights. The key is to identify assets with high volatility and look for four signals: upward breakout, downward breakdown, trend reversal, or retracement.

Classic example: On January 15, 2015, the Swiss National Bank suddenly announced the removal of EUR/CHF 1.2000 floor, destroying the market’s “comfort zone” and triggering the Swiss franc black swan event. This was a clear downward breakdown signal, and early-positioned investors made huge profits.

Trading mindset: Swing trading profits from volatility differences, but larger swings mean higher risk. Take profits when the trend looks good.

5. Position Trading｜Find low-cost entry points from a macro perspective

If you prefer not to trade frequently, position trading suits you best. Holding periods can be months or even years, with low trading frequency and minimal time commitment. The key is to use macroeconomic analysis and historical trends to identify the right direction, then build positions at low-cost levels.

Forex doesn’t usually surge or plummet to extremes like stocks; it tends to fluctuate within a broad range. The USD index’s recent 10-year high at 114 is a natural reference point. If you expect the USD to weaken with the US economy recession, you should gradually build short positions at relatively high levels, rather than blindly chasing dips.

Trading mindset: Capture the big trend, find the lowest-cost entry points within volatility cycles. Patience yields the best returns.

Market Advantages of Currency Trading

Wide Application, Life as Trading

Travel abroad, online shopping, import-export—most people have currency exchange needs. Understanding the economic fundamentals of different currencies prepares you for practical use, arbitrage, or hedging. When JPY is low, exchange some in advance—ready for travel and also participating in carry trades.

Easy to Grasp Major Trends

Compared to stocks, which require analyzing individual companies’ fundamentals, forex logic is more straightforward—by understanding the interest rate policies, central bank attitudes, and inflation data of the target country, you can infer the medium-term trend. Short-term trading requires more details, but long-term trend judgment is easier.

Highest Market Transparency

As the largest financial market globally, with daily trading volume of 6 trillion USD, operating 24 hours through four major trading sessions (Sydney, Tokyo, London, New York). The huge volume makes market manipulation difficult, and investment decisions are more based on real data than guesses.

Comparison of Trading Hours Across Different Channels

Bank Currency Trading

Typically open from 9:00 am to 3:30 pm (varies by bank). Closed on weekends and holidays, so you cannot respond promptly to major events.

Forex Margin Trading Market Hours

No central exchange, so forex margin trading is available 24 hours (Monday to Friday). The four major trading sessions and their Taiwan time equivalents:

Overlap of sessions allows choosing the most suitable trading time without fixed hours.

Building Your Own Trading System

There’s no single best trading method—only the one that suits you best. When choosing, consider:

• Capital size: Small funds suit high leverage short-term trading; large capital can opt for stable long-term positions.
• Risk preference: Aggressive traders may try margin trading; conservative ones prefer bank deposits or funds.
• Time commitment: Office workers may prefer swing or position trading; full-time traders can do day or range trading.
• Knowledge level: Start with simple trend trading, then gradually learn more complex strategies.

It’s recommended to practice with demo accounts first—no need to deposit real money—so you can track real-time strategy performance anytime, anywhere. Once familiar, then use real funds. Spread trading is about market volatility rewarding prepared traders. With diligent research and practice, you can find your own profit rhythm in currency trading.