Monday, November 12, 2007

Time To Accumulate A Carry?

The AUDJPY is down around 96.00 at the moment.

I've ridden the money train on the way down a couple of times. I don't know if there is a real term for this, but as it goes down, I add new positions as previous ones have profit protected behind a stop loss. When you catch a large down movement using this practice you can put nearly your entire account into play -- while only taking any risk on the last one or two entry positions.

Anyhow, that's a bit off topic for today. I'm thinking that it's time for me to try to accumulate some carry positions. I would of course have to buy when I expect an upturn or a correction and then place protective stop losses above the purchase price. Once again, the only real significant risk is on the last position opened since it starts out negative and needs a little bit of room to breath.

However, while I'd like to accumulate some carry positions, it seems to me that this will be an exercise in bottom picking. If we aren't at bottom and the positions are all protected behind a stop loss, then they will all be closed as we move towards a new low.

Wait a minute! That's not a bad thing. It means that if we are diligent in this strategy that eventually we will have a string of positions anchored down at a level near the eventual bottom, whatever it finally happens to be. Then, upon any potential future unwinds that close out our positions, we can reenter either at a lower bottom or very near where we were.

It sounds like a good long term strategy to me -- I just wish I had some serious capital to play with!

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