The Everything Guide to Currency Trading by David Borman

Author:David Borman [Borman, David]
Language: eng
Format: epub
ISBN: 9781440531408
Publisher: Adams Media
Published: 2012-07-15T00:00:00+00:00

Keeping your head and wits about you in bad times can add to your bottom line. Many Forex traders take advantage of the worst of times. You, too, can use bad markets to your advantage by using carry trades, adding to your positions, or being a contrarian trader by going long on risk-loving currency pairs.

Consider Closing Losing Trades

Of course, if you have other trades on the books, and they are also losers, then you might consider closing out some of your losing trades in order to redeploy the cash into a more attractive trade. For example, if you are in a long AUD/USD, a long GBP/USD, and a short EUR/SEK, and they are all down due to extreme risk aversion, then you might want to consider closing out some of your better losers such as a closing out your GBP/USD and the EUR/SEK in order to go all out long in the AUD/USD, and secondly to free up some much-needed margin if you are close to a margin call. A few bucks lost are worth it if you are going to use the margin in a way that will gather returns very quickly when the markets return in the future.

Additionally, the market might be much skewed in its analysis of its conditions at the time. When this is the case, the money will flow back into the classics first. These would be the trades that take the least amount of speculation to determine if they will recover. If the AUD/USD has performed well over the years, then it will most likely perform well in the future. It is a classic trade, and you should be thinking of the classic, uncomplicated trades in bad times. Most of the other traders will be doing the same, and you will be able to capture the profits then.

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