Factors to consider when choosing a forex trading strategy in Hong Kong


The foreign exchange market is the largest, most liquid financial market globally. This makes it an ideal area for investors, whether it be for short or long term investments. The following are some of the highs and lows of forex trading in Hong Kong.

The first thing to realise about the market in Hong Kong (and most East Asian countries) is that it operates under different rules to those in the west. The forex market requires a lot of patience and time, so if you want to explore the best ways to trade foreign currencies, start learning about the various strategies out there.

Money management

The most important thing every trader should know about forex trading is money management. This means taking calculated risks for your capital, either by opening multiple trades or only doing long term investing. You should also realise that currencies tend to move in waves because of economic factors like employment rates, inflation rates, interest rates and political scenarios like wars. Therefore, not every trade will be profitable; only a few will yield the results you seek.

Goal setting

The next thing you should know about forex trading is to set goals. This means writing out specific criteria regarding your investments. Most people go with their gut feeling when it comes to investing in currencies, but this can be dangerous because there’s no clear direction. 

You, therefore, need to create a strategy before putting your money on the line. Write down everything from how much time you are willing to invest in analysing trends, what sort of return every investment should have every quarter and so on.

Forex traders in Asia should take note of the following:

To quickly gain a competitive edge, forex traders should take note of these essential differences as outlined by asianforextrading.com :

1) In Hong Kong, trades can be settled any time before 10 PM for next day delivery. 

2) There is a lack of depth on the order book compared to other markets (traders should expect to pay higher spreads and commissions).

3) Market activity levels are low during the weekends and holidays. 

4) A smaller investor base actively maintains an open position overnight.

Whilst there may not necessarily always be direct implications for all forex traders, each trader must understand their market before getting started with trading.

Standard forex trading strategies

Generally speaking, most forex traders will already be familiar with the standard strategies used for predicting currency movement: fundamental analysis and technical analysis. 

Fundamental analysis 

Fundamental analysis is generally considered the ‘correct’ approach to take when making predictions about currency movements. Still, it can also leave newer traders feeling overwhelmed due to varying opinions on which economic conditions are worth paying attention to over others.

Technical analysis

On the other hand, technical analysis focuses on price movement itself rather than trying to figure out what caused that movement. It looks at historical data to predict how rapidly a currency may rise/fall based on its past behaviour. To the inexperienced, technical analysis is often seen as nothing but pure luck or ‘pseudo-science’ However, it has helped many novice traders better understand their market without learning specific economic theories.

Benefits of using a forex strategy

One factor to consider when choosing a forex strategy is looking for capital gains or income generation. Investors trying to make capital gains will want to choose strategies that look at how currency pairs fluctuate over time, while those looking for income generation should focus on strategies involving trading interest rate differentials (IRD). With this said, it does not mean one can’t use both these types of strategies to suit their needs.

Final thoughts

To sum everything up, many factors go into choosing a successful forex strategy that can help each investor reach their goal, whether for short-term capital gains or income generation. Beginner traders interested in forex Hong Kong are advised to use an experienced and reputable online broker from Saxo Bank.