Carry Trade

• Principle: Exploit interest rate differentials between countries by financing in low-interest-rate currencies and investing in high-interest-rate currencies.

• Feature: Suitable in environments with significant interest rate spreads and relatively low market volatility.

• Risk: Sharp exchange rate fluctuations may offset the interest rate differential gains.

Trend Following

• Principle: Capture long-term exchange rate trends through technical analysis or quantitative models.

• Feature: Follow the prevailing trend, suitable for one-way markets.

• Risk: In choppy markets, it may lead to significant drawdowns.

Arbitrage Trading

• Principle: Exploit price discrepancies between different markets or instruments to conduct risk-free arbitrage.

• Example: Basis trading between spot and futures, or cross-platform quote arbitrage.

• Feature: Low risk, low return, requiring high execution efficiency.

Hedging Strategy

• Principle: Hedge exchange rate risks through derivatives such as options, forwards, or swaps.

• Feature: Suitable for risk management of corporations or high-net-worth investors.

• Risk: Hedging costs may reduce overall returns.

Quantitative / High-Frequency FX

• Principle: Capture short-term price fluctuations through algorithms and high-speed trading.

• Feature: Frequent returns, highly dependent on technology and execution speed.

• Risk: Highly sensitive to trading costs, liquidity, and system stability.