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Risk On, Risk Off!
By Mike Conlon | November 17, 2009
Much like Mr. Miyagi’s advice to Daniel-san, today’s forex market is a case of wax-on, wax off. The lesson to be learned here is that the more things change, the more they stay the same. What do I mean by this? Well, it is rare that any investment just moves in one direction without experiencing some sort of pullback, sideways action, or just a brief pause.
The thing that makes the currency market so nice to trade is that the market tends to “trend” more than other markets such as the stock or futures markets. The reason for this is because the currency markets are driven by fundamental policies of major countries around the world, and it is a rare situation that these policies shift as frequently as other markets.
So one of the easiest ways to participate is to just find currencies with identifiable trends– and then trade with them! I’m sure you’ve hear the phrase ,”the trend is your friend”– and this couldn’t be more true than in the forex market.
So today the market is risk-off day, as the last few days were risk-on! As to be expected, there is US dollar (USD) and Japanese yen (JPY) strength, and Australian (AUD) and Canadian (CAD) dollar weakness. So if you’re a short-term trader, you can make a few bucks playing the counter-trend move on the smaller time-frames.
However, overall, the thing you should be looking at is the trend. Let’s take a look at the AUD/USD pair: (click chart to enlarge)
So even though, this pair is down (1.01%) today, the overall trend is up. So this is what we would call a buying opportunity. Now, does that mean that this pair is going to continue higher forever? No, of course not. But until there is a fundamental change in the economy, policy, etc. this represents a low-risk opportunity to get into the trade. Not to mention the daily interest you will make from this pair!
And as a trader, this is exactly what you should be looking to do: get into trades that are low risk with potentially high rewards.
To learn more about how to identify trends, be sure to check out our currency trading courses!
Think you know about technical analysis and want to test the market? Sign up for a free, real-time demo account here!
Tags: account, AUD, blog, cad, course, currenc, currencies, currency, currency trading, demo, dollar, dow, economy, forex, forextrading, fundamental, fx, fxedu, interest, invest, jpy, market, Mike Conlon, pair, time, trade, trader, trades, trend, USD, Yen
Topics: What To Look At In The Market |