Monday, January 7, 2008

AUDJPY Carry Loading Time?

Well, it's always impossible to call a bottom, but given the amount of downturn recently, it might be time to start loading up on a bit of AUDJPY.

For example, you could enter some minor positions right after you witness some support after a little bit of free fall. Whether or not it's a bottom does not matter as long as you are investing small enough quantities with a plan to hold on long enough to see an eventual upturn.

Alternately, while the price is relatively low, you might want to set up a grid to catch any eventual return to traditional prices.

You might consider doing something like the following:
  • Set a purchase of some number of items at each boundary of N pips.
  • If the amounts are small enough and the prices low enough, then you'll be able to hold the position indefinitely.
  • Set a take profit for each purchase at a level that lets you hold any other purchases that occur prior to the take profit.
For example, you might purchase N units every 10 pips with a take profit of 50 pips. This means that during an upwards spike you could acquire up to 5 purchases at a time, maximum, for whatever potential downturn you may encounter.

If you don't purchase small enough quantities you'll risk large losses or risk losing money as the grid purchases are lossed-out prior to another eventual upturn.

Avoid getting greedy, take small enough positions that you can hold them indefinitely as carry trades, and then set up strategies guaranteed to make you profits as the price goes up and down over time. After all, that's your only sure bet, that the price will go up and down over time.

Of course, on the risk front, with the AUDJPY being driven by the DOW, it is possible that we are going to continue on a downward path for months, as the US figures out whether or not it is going to slip into a recession.

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