How can you benefit from a currency appreciation in forex trading?

As a participant in forex trading, you can benefit from an appreciation through 2 actions. See the following examples:

•     Let's assume that yesterday the EUR was trading at 1.18 against the USD.
•     Today the common currency stands at 1.20 USD.

You have thus witnessed a currency appreciation of the euro by 0.02 cents.

You would have profited from the change by:

•     The long trade or the bet on the euro.
•     A short trade against the US dollar.

In both cases you would have been sure of around 200 pips. Attention: For better understanding, the example is based on an unrealistically large currency revaluation. As a rule, there are daily changes of between 40 and 60 pips, which can only be seen on the third and fourth decimal places.

Can daily currency appreciation or depreciation be predicted?

There are analysts who take on this task and use fundamental and economic data. However, these forecasts are only 50% accurate because they cannot capture the current market sentiment. The respective mood of the players, however, drives the prices. How participants in foreign exchange trading react to negative data, central bank decisions and political announcements cannot be calculated.

How should revaluations and devaluations be traded?

Institutional market participants often trade amounts in the multi-digit millions or billions. They tend to have long-term open positions in https://exness-ch.club/ and enter at historical highs or lows. They are aware that currency pairs can fluctuate considerably; they set very generous loss limits.

There were indeed institutional players who actively accompanied the appreciation of the dollar between 2009 and 2015 and made huge profits. However, it makes more sense to follow the currency appreciation as a day trader. You can check what is Exness Singapore broker company if you are interested in day forex trading.You can take advantage of every single price movement and also profit from corrections.

You can enter with comparatively small sums, use high leverage and earn many times that of a long-term player. Important are:

•     The personal commitment for a few hours a day in front of the screen.
•     The willingness to participate in possible trend reversals at any time.
•     The setting of a tight loss limit.

What are the disadvantages of currency appreciation?

When a country revaluates its currency, products for export and travel to that country become more expensive. The demand for that country's products decreases, as does the number of tourists. Ultimately, less money comes into the state and private coffers, and tax revenue is also reduced.

However, these effects are only triggered by a remarkable appreciation.

Examples of significant currency revaluations in modern times

•     The euro stood at 1.62 dollars in 2009.
•     The major market players considered the common currency overvalued and pushed it down to $1.05 by 2015.
•     The European Central Bank looked on and did nothing to support the euro.

Only when Mario Draghi promised in 2015 to do everything in his power to save the euro did the currency appreciate against the dollar and other currencies.

•     The British exit from the EU later resulted in another loss of confidence among the major players. As a result, the euro fell again to 1.05 dollars. As of 2018, the euro appreciated again to 1.25 US dollars.
•     Regardless of all the incidents, the euro has ranked between 1.22 and 1.18 dollars in the last two years.

Currency appreciation is just as significant a development in forex trading as depreciation. Both occur several times per trading day in each currency pair and you should take advantage of them. If handled correctly, the opportunities far outweigh any risks.