Forex and the Risk Run Up

It's been a few days since I had the chance to sit down at the blogspot and open up on a few comments. Last weeks' trading was very good to us as we capitalized on the weakening dollar comments by the Fed, and by the anti-dollar reaction to the Durable Goods Orders of Friday.

As I listen to what other traders are saying today, most are inclined to think that the run in the risk currencies is about over for now and due for a strong pullback. And from an overbought point of view, this is certainly true. But always remember, there are two sides to every market. And while some are looking for a retracement, others are looking for a continued advance. How do we tell who is right? The real answer? WE DON'T.

Trying to pick the "right" in the forex is risky business and is what makes most traders real losers. While it behooves us to always be on guard against reversals, and while some traders seem to make a living at trading off of them, I find it much easier to to trade the trend. So I ask you again, "How do we tell who is right?" BOTH ARE.

Markets will always correct...at some point. But you can lose an awful lot of money trying to find that correction point. From my perspective, stay with the trend. Yes, it's true. We will always be losers at the end of the trend. But that is simply the nature of trading. Let's be winners as long as the tend will last. Doing so will mean that,
1.) sometimes we will give back profit when the trend reverses, but we'll still walk away with a good trade;
2.) sometimes, our profit targets will get hit and we are out before the market reverses. In that case we still have our profits, and no harm inflicted;
3.) sometimes, we may enter a trade right at the reversal point and it is a loser from the get go.

However, if we have exercised proper restraint and money mangement, employed suitable stops top protect our capital, and if this is only one of three scenarios, we should easily come out ahead in the end following the trend and not being extreme reversal pickers.

Happy Trading!
Bill