The types of foreign exchange are quite diverse and can generally be divided into four major categories: direct crosses, cross crosses, commodity futures, and stock index futures.

Each type has its own characteristics. Understanding these characteristics and adjusting your trading strategies accordingly can help better avoid certain risks and increase profits. For instance, some types have a large fluctuation range and, after a period of consolidation, will exhibit a continuous trend. At such times, we know to hold on to the significant profit potential in the trend following the consolidation. Some types tend to move in slow trends, often fluctuating upwards or downwards. When trading these types, it's important to adjust the trailing stop loss to be more conservative; otherwise, orders may be shaken out during the fluctuations, missing out on the trend.

Furthermore, some types, such as the Dow Jones Index and Hang Seng Index in stock index futures, often experience significant gaps at the open the following day. Therefore, when holding positions overnight, it is crucial to control the position size; otherwise, it's easy to take the wrong direction, and a large gap at the open can lead to severe losses.

There are many such techniques in trading, all of which involve making strategic adjustments based on the characteristics of the type.

Today's article will discuss the six most mainstream trading types in the foreign exchange market, including their characteristics, suitable time frames, and my trading experience with these types. I believe it will be of great help to you.

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1. Spot Gold

Characteristics of Gold:

Gold is considered the king among foreign exchange types, with 90% of those who have traded foreign exchange having traded gold. When gold moves in a single trend, it does so quickly, with large ranges and small retracements, often not providing much room for maneuver when orders are against the trend. Failure to strictly stop losses and blindly adding to positions against the trend can lead to a dire outcome.However, gold trading has a large volume, smooth candlestick lines, and standard technical levels, making it very suitable for technical analysis. Many people really enjoy it.

Gold is like Empress Wu Zetian, the king of varieties, with a passionate nature and aggressive tactics. It is suitable for those with a more aggressive trading style and a higher risk preference.

Precautions for trading gold:

(1) Suitable time frame

Gold is more suitable for intraday trading because of its large trading volume, significant intraday price fluctuations, and low spreads, providing ample profit space. Additionally, it is suitable for short-term, medium-term, and long-term trading.

Gold is a global commodity, attracting attention from the worldwide market, and often sees significant price movements during the Asian trading session, making it suitable for trading at all times.

(2) Data with significant impact on gold

Non-farm payroll data and Federal Reserve interest rate decisions, as well as sudden wars and geopolitical events, can also affect the trend of gold.

(3) My trading experience & skills

Gold is a variety that fluctuates quickly and has a large price range, making it suitable for breakout trading.I typically engage in intraday gold trading on a 15-minute chart by using the method of trend line breakouts. I choose to trade from 2 PM to 10 PM Beijing time because this period is when the gold market is most active, making it more worthwhile to trade.

I have also provided a detailed explanation on my public account (Eight-Digit Garden) about how to select the trading cycles for various instruments, which everyone can refer to in conjunction.

Here is an example of a gold trade I previously made, see the chart:

Select the high (low) point of the consolidation trend that started in the early morning of the previous day, and connect it with the subsequent high (low) point of the day to form a trend line. Wait for the market to break through the trend line during the trading session to enter the trade, set the stop loss at the previous high or low of the entry position, and set the profit-to-loss ratio at 2:1. This method is very suitable for the gold instrument.

Gold is the king; mastering the gold trade alone can make one a winner in the foreign exchange market. When selecting instruments, having gold and at most one or two additional foreign currency or commodity pairs is sufficient.

2. Euro to US Dollar

Characteristics of Euro to US Dollar:

The Euro to US Dollar is one of the most mainstream foreign exchange instruments, known for its stable trend and mild fluctuations. It is like the historical figure Wang Zhaojun, who was married far away to the frontier, beautiful, gentle, and strong, making significant historical contributions.

The US Dollar is the world's largest reserve currency, while the Euro is the second largest. The United States and the European Union are the two largest and most developed economies globally, with the closest economic ties to these two currencies. The most significant characteristic of these two currencies combined is their stability.

See the chart below for the weekly K-line of the Euro to US Dollar since 2018.In the recent four years of market trends, except for the initial weeks of the pandemic last year when there was significant volatility, the fluctuation range of the euro against the US dollar has been relatively stable.

The euro against the US dollar tends to have a slower trend, with more retracements and a limited operating space, which makes the risk relatively lower. This is suitable for beginners or traders who prefer a more stable approach. Due to the stability of the euro against the US dollar, many EA (Expert Advisor) automated trading systems use this currency pair.

Precautions for trading the euro against the US dollar:

(1) Suitable time frame

The euro against the US dollar has almost the lowest spread among all forex currency pairs, and with its high trading volume, it is suitable for intraday trading, as well as short, medium, and long-term strategies.

I generally start trading this pair from 3 PM Beijing time and end at 12 AM Beijing time, as the fluctuations are minimal during the morning hours in Beijing time, making it difficult to generate profits.

(2) Influential data

Aside from the non-farm payroll data, the interest rate decisions of the Federal Reserve and the European Central Bank, the euro against the US dollar rarely experiences drastic fluctuations. Other economic data from the Eurozone has little impact on it.

(3) My trading experience & techniques

The euro against the US dollar has a stable trend with frequent retracements, making it suitable to enter the market after the trend is confirmed, waiting for a retrace. This approach results in smaller stop losses and is more likely to achieve a favorable risk-reward ratio.I am accustomed to conducting such trades at the 1-hour level of the Euro against the US Dollar, with positions typically held for a period of 2-3 days. Within this 2-3 day cycle, the trend of the Euro against the US Dollar can move more than 300 pips, resulting in relatively good profit margins.

For the specific trading method, please refer to the illustration below.

After a significant rise or fall in the market, a reversal is confirmed when the price breaks through the ascending or descending trend line and breaks position, connecting the inflection point ahead of the trend line.

Once the reversal is established, the market will enter a consolidation phase. Place an order directly at the 38.2% Fibonacci retracement level, and set a uniform stop loss at the previous high point, with a risk-reward ratio set at 2:1.

The Euro against the US Dollar is a suitable currency pair for both beginners and experienced traders and can be considered the first choice for foreign exchange trading.

3. British Pound against the US Dollar

Characteristics of the British Pound against the US Dollar:

The British Pound against the US Dollar is more volatile, often changing rapidly from clear skies to a storm, much like Huang Rong from "The Legend of the Condor Heroes," who is intelligent, beautiful, and very attractive, yet unpredictable.

The fluctuation range of the British Pound against the US Dollar is slightly larger than that of the Euro against the US Dollar, with daily ranges typically between 150 and 200 pips. Especially after the Brexit in 2016, the fundamentals of the British economy became unstable, increasing the uncertainties for the Pound, strengthening speculative sentiment in the market, and enlarging the Pound's fluctuation range.

In practice, there are many fake breakouts in the trend of the British Pound against the US Dollar. The one-way market moves quickly with few pullbacks, making trading more challenging.Precautions for Pound to US Dollar Exchange:

(1) Suitable Time Frame

The spread for the Pound to US Dollar is slightly higher than that for the Euro to US Dollar, but the fluctuation range is larger, making it suitable for intraday trading, as well as short, medium, and long-term strategies.

For intraday trading, one can choose a session starting from 3 PM Beijing time and ending at 12 AM Beijing time.

(2) Influential Data

In addition to being significantly responsive to US economic data, the Pound to US Dollar exchange rate is also affected by the UK's PMI, GDP, unemployment rate, and employment rate data, which can lead to trend changes. It is crucial to pay attention to these when trading intraday.

(3) My Trading Experience & Skills

The Pound to US Dollar market moves quickly with small pullbacks, making it suitable for break-and-enter trading strategies.

When I engage in intraday trading of the Pound to US Dollar, I prepare myself mentally more thoroughly, as I am aware that it has more false breakouts compared to the Euro to US Dollar and gold. Without mental preparation, one can easily be thrown off by false breakouts, affecting trading emotions.

Additionally, due to the frequent V-shaped reversals in the Pound to US Dollar intraday market, where candlestick charts often show long wicks, I set my profit targets to be achieved all at once, taking all profits in one go, rather than using a method of taking profits in batches.I will also promptly follow up with a stop loss after making a profit, to prevent the originally profitable order from turning from profit to loss during a V-shaped reversal.

The difficulty of trading the British Pound against the US Dollar is greater than that of the Euro against the US Dollar, but less than that of gold, making it a moderate choice.

4. British Pound against Japanese Yen

Before discussing this currency pair, let's supplement some knowledge about cross rates.

Foreign exchange trading is the exchange rate of two currencies. If one of the two currencies in the exchange is the US Dollar, it is called a direct quote, such as the aforementioned Euro against the US Dollar, British Pound against the US Dollar, or US Dollar against Japanese Yen.

The counterpart to direct quotes is the cross rate, which refers to the exchange rate product of two currencies other than the US Dollar. For example, British Pound against Japanese Yen, Euro against British Pound, Australian Dollar against Japanese Yen, etc.

Characteristics of the British Pound against Japanese Yen:

The British Pound against Japanese Yen is the most mainstream among cross rates, with a large market trading volume, good liquidity, significant fluctuations, and not high spreads.

The fluctuation of the British Pound against Japanese Yen is very large, almost equal to that of gold. The market is particularly "deceptive," moving quickly and sharply in a one-sided trend. If you get it right, the profit is substantial and very tempting, much like King Zhou's favored concubine, Daji, who is enchanting and seductive, yet brings disaster to the country.

The market changes too quickly and too drastically, with many fake breakouts. Although the profit is good if you get it right, if you can't keep up with the rhythm, it can lead to significant losses, making it an object of both love and hate.The trading difficulty of the British Pound against the Japanese Yen is higher than that of the Pound against the US Dollar and gold; novice traders must be cautious in their choices.

Precautions for trading the British Pound against the Japanese Yen:

(1) Suitable Time Frames

Due to the high trading volume and good liquidity in the Pound-Yen market, with large fluctuations and relatively low spreads, intraday trading is possible. The significant volatility also makes it suitable for medium and long-term trading. Since the Pound-Yen includes the Yen, there will be considerable fluctuations in the Asian session, but the swings are not as large as those in the European and American sessions. It is still recommended that intraday traders start from 3 PM Beijing time and end at 12 AM Beijing time.

(2) Influential Data

The Pound-Yen is greatly affected by UK economic data, while the Yen is less responsive to Japanese economic data, which is essentially not worth paying much attention to.

(3) My Trading Experience & Techniques

Because it is a cross currency pair, the Pound-Yen has its own trend and direction, but it is also influenced by the two direct currency pairs, Pound against the US Dollar (GBPUSD) and US Dollar against the Japanese Yen (USDJPY). When the trends of the two direct currency pairs are synchronized, the operating space of the Pound-Yen is positively superimposed, leading to significant movements. In such cases, if I am holding a position, I would proactively increase my profit target to pursue higher profits.Additionally, if the trends of two direct crosses move in opposite directions and the direction of long or short is unclear, the British pound against the Japanese yen will enter a consolidating market. At this time, I will adopt a conservative exit strategy for trading, such as timely tracking stop-loss to protect profits, for example, timely closing a portion of the profitable positions in batches to secure some profits first.

5 Hang Seng Index

Characteristics of the Hang Seng Index:

The Hang Seng Index has three characteristics in its trend: fast fluctuations, large amplitude, and quick reversals, which often lead to numerous margin calls for traders. It is akin to Empress Lü of the early Western Han Dynasty, who was ruthless, killed countless people, and changed her face faster than turning a page, instilling fear in others.

Intraday fluctuations of 500 to 600 points are normal for the Hang Seng Index, and sometimes they can even reach 1000 points.

Due to the overall large amplitude, even when the Hang Seng Index's K-line is placed at the 1-minute level, it can achieve fluctuations of twenty to thirty points, which is rare among other foreign exchange instruments.

Moreover, the Hang Seng Index often exhibits a seesaw pattern, with frequent intraday fluctuations and frequent shifts between long and short positions, even if the overall daily amplitude is not significant. Another notable feature of the Hang Seng Index is the presence of gaps at the open and close, which is a characteristic of almost all stock index futures.

The Hang Seng Index is like a dangerous time bomb; if you misjudge the direction, miss the rhythm, or do not strictly implement stop-losses, you may get caught in a deep trap, or even experience a margin call, so the Hang Seng is not very suitable for ordinary traders.

Precautions for trading the Hang Seng Index:

(1) Suitable time frameThe Hang Seng Index experiences significant intraday volatility, which allows for intraday trading opportunities. However, gaps at the open have a considerable impact on overnight positions, making it unsuitable for short-term trades that hold positions for 2-3 days. Medium or long-term trading is less sensitive to gaps, and thus more feasible.

Based on my experience, the greatest fluctuations occur at the 9:15 AM open, and intraday trading can commence at that time, continuing until the close (the Hang Seng Index does not trade 24 hours a day).

(2) Influential Data

The interconnectivity of global stock markets is growing stronger, and the Hang Seng Index is influenced by the trends in European and American stock markets. Additionally, Hong Kong's economic data, Mainland China's economic data, and the trend of the China Shanghai Composite Index are fundamental factors that affect the Hang Seng Index's movement.

(3) My Trading Experience & Techniques

Let me share my most significant experience in trading the Hang Seng Index: It is essential to strictly enforce stop-loss orders.

The Hang Seng Index has a vast range of fluctuation, and the stability of the stock market is much worse than that of the foreign exchange market, with more risk events that can lead to uncontrollable market conditions, resulting in sharp declines or surges.

Whether I am trading the Hang Seng Index intraday or in the medium to long term, I strictly enforce stop-loss orders. This is especially true for intraday trading, as the stop-loss range is relatively small, and positions tend to be heavier. If you do not strictly enforce a stop-loss when the direction is wrong, during a flash crash, the account could experience a drawdown of more than 50% or even a margin call.

No amount of profits from multiple trades can compensate for the losses from a single instance of not enforcing a stop-loss that leads to a margin call. Therefore, strictly enforcing stop-loss orders when trading the Hang Seng Index is an ironclad rule.

6. Crude OilCrude Oil Characteristics:

Crude oil is often referred to as "crazy oil" among traders due to its unpredictable nature, much like Mei Chaofeng from the novel "The Legend of the Condor Heroes." Mei Chaofeng, after being struck down and practicing martial arts to the point of obsession, becomes capricious and volatile in her emotions.

As a special commodity, crude oil's fluctuation range is similar to that of gold, with normal daily fluctuations between 200 to 300 points. However, its overall trend is less regular, less technical, with more fake breakouts and more "V" shaped reversals. The price moves quickly, making trading more challenging.

The difficulty of trading crude oil is higher than that of gold but lower than that of the Hang Seng Index, making it suitable for friends with a higher risk preference.

Precautions for Trading Crude Oil:

(1) Suitable Time Frames

The intraday fluctuation and trading spreads of crude oil meet the conditions for intraday trading, and its trend is relatively strong, making it also suitable for medium and long-term investments. The volatility of crude oil has a strong regularity in terms of time. Before 3 PM Beijing time, the movement is usually not significant, so intraday traders can directly skip the period before 3 PM.

Starting from 3 PM Beijing time, the fluctuation range increases, especially during the American session (from 8:30 PM to 1 AM Beijing time).

(2) Data with Significant Impact on Crude OilThe most important data affecting the fluctuation of crude oil prices is the weekly published U.S. EIA crude oil inventory data. After the data is released, the market will experience rapid increases or decreases.

(3) My trading experience & skills

In practical crude oil trading, there is a noticeable characteristic: rectangle consolidations tend to form false breakouts. After a false breakout, the market will move in a significant space and in a rapid positive direction. This type of trend is an excellent trading opportunity, and everyone should be good at grasping it in practice.

In my own practical experience with crude oil, my favorite is to trade during rectangle consolidations that form false breakouts, lure both bulls and bears, and then move in the opposite direction of the true market trend.

Such market trends are fast and have a large space, making profits very satisfying. I would even add to my position in the trend. Grasping such opportunities in practice can lead to great profits. However, these opportunities are relatively rare and require patient waiting.

The candlestick cycle for trading can be chosen as 15 minutes, 1 hour, up to a maximum of 4 hours.

7. General principles for selecting varieties

Here are three suggestions for selecting varieties:

(1) Choose the familiar over the unfamiliar. Try to trade in varieties that you are familiar with.

(2) Do not be overly ambitious and take on too much. With limited energy, it is easier to profit by doing well and focusing on a few rather than trying to do too many.(3) Start with the easy and progress to the difficult. Newcomers to trading can begin with trading the Euro against the US Dollar, and gradually move on to more advanced levels.