Trend following means finding a trend and following it, it sounds simple, but its a difficult philosophy to follow especially for new and some inexperienced traders. One of my followers on the blog asked me if i hold a long and short position in the same currency. Yes i do, but its not hedging as some traders could think. The reason i hold long and short is because as a trend follower i don’t know when a new trend begins, and i dont know when a trend ends…and no one does. Look at the chart below…Hypothetically, lets say i am short a currency pair and i am in the money, i don’t want to relinquish my position as yet because i don’t know how far price will go down. And now lets say i have a buy signal…i will still take that buy signal, and still maintain my short position….the reason i take the long is because i don’t know if its the start of a new trend…so i don’t want to miss that opportunity if it was a start of a new trend. Looking at the chart, i maintained my short position which then followed through and made me more gains…but i have also taken advantage of the small move up which might have reached my partial profits. You can see how i could have made money in the same currency pair, selling and buying.
Imagine if i had not bought (because i was short biased) and that move up was the trend of the year for that currency, i could have missed a big move for being biased.
Note: Watching Usdcad, looking good for a buy when the current hourly bar closes below BB, will send chart, when I place the trade.
bar failed to close below BB…so trade void
By: joetradingplace on March 9, 2015
at 1:53 pm
[…] at this post before you read https://joetradingplace.wordpress.com/2015/03/09/holding-long-and-short-in-same-currency/ . I mentioned how i can take a short and long trade in the same market, don’t confuse it with […]
By: Long and Short in same currency | PRICE ACTION TRADER on April 22, 2015
at 1:43 pm