As you gain experience and insight into how the Forex market operates, you will no doubt want to practice more challenging strategies unfit for a novice trader. Through the use of more advanced strategies, you can increase your profits while more effectively controlling your risks. The following are some advanced methods of trading you can use when your confidence has grown and you've mastered the basics.
Hedging and Options
Hedging ultimately comes down to taking both a long and short position on the same currency by using more than one currency pair.
An example would be when you felt that the Australian dollar would probably fall against the US Dollar, so you short the USD/AUD. However, you also believe the AUD is going to gain strength against the Euro. At this point, you can buy EUR/AUD, thus playing both possibilities. In a sense, you may be able to win twice, but you will be able to greatly reduce your risk since at least one of these plays is likely to be profitable.
Position trading has two possible components: merely buying and holding or performing a brief series of trades equivalent to dollar cost averaging. For example, if you have exposure to a currency pair like GBP/JPY, you may simply be following a long term trend. In a case like this, you can merely allow the trend to carry your position until your research and intuition tell you to close it.
However, you can also use Position Trading to make a profit even if your initial trade ends up being unprofitable. If you short a particular currency pair at one price and it ends up rising later, you can then short it again at its higher price. If and when it subsequently downtrends again, your aggregate position will still be profitable.