When to trade the USD pivot.
As we enter market uncertainty, you should be aware that you can take advantage of a currency pair, stock index or commodity going down as well as up.
Most people understand the concept that traders make money through buying an asset and then selling it when its price goes up. However, it’s just as possible for them to make money when the value goes down. Traders can profit from declining stock prices, volatile commodities or even an entire market crash by doing what is known as short selling.
Why is it important? Simple, in CFD trading we trade the price movement, we never own the underlying asset, we make money on trading in the correct direction, simply put, either up or down and then knowing when to close the position in profit.
· Short sellers are betting that an asset is due to decrease in value.
· Shorting can be an effective way of hedging your bets against losing long positions
· Traders can use this technique for assets such as indices, currencies, and commodities, although the stock market is perhaps the most popular.
· This approach can bring profit for experienced traders.
What is short selling?
Essentially, short selling is betting that an asset will lose value. The aim is the same as any other short-term trading strategy — to sell for more than you buy.
How does it work in trading?
Many investors profit from bullish markets. They invest in companies they expect to grow based on optimistic views. However, more short-term traders attempt to profit from declining asset prices and market crashes. These dealers prefer to speculate on negative market sentiment, such as a bear market. Covid, Inflation, Ukraine Russian conflict, accelerated this sentiment lately.
Traders may short assets for several reasons. The first and most common is to make a profit, but this ‘sell high, buy low’ approach can also be an effective way of hedging — that is, taking two differing positions on the same asset so the gains from one can offset the losses from the other. For instance, many traders might hold a long position on an asset (buying it to sell later at a higher price), but because that asset is declining in value, they might choose simultaneously to short the same asset to take advantage of that diminishing share price. The profits they gain from the short will mitigate the losses they’re experiencing from their long position — literally cutting their losses.
Use of leverage. Trading with leverage is a two-sided sword, get it right and the rewards can be very big and very fast.
Contracts for difference (CFDs) are a popular method of leveraged trading. CFD traders speculate whether they believe assets or currency pairs will fall or rise by entering a contract stipulating the buyer must pay the seller the difference between an asset’s current value and its value when the contract expires. CFDs are available globally but are subject commission fees.
Shorting a currency pair
You can place CFD trades on foreign exchange (forex) by betting on how two currencies will fair against each other — for example pound sterling and the US dollar. If you short sterling, you are hoping it will fall against the dollar. If you short the dollar, you are hoping the opposite will happen.
What’s happening in the markets right now?
This is the big question. The USD, Dollar is very strong against its peers, all traders are eying up when to take advantage of the expected reversal?
Developed economies are taking a hit from the dollar’s appreciation to multi-decade highs.
Fuelled by the Federal Reserve’s most aggressive tightening cycle in more than a generation, i.e., increasing interest rates, the stronger greenback is pushing rival currencies lower.
That’s ratcheting up pressure on other central banks to raise interest rates just as an energy crisis and spiralling consumer prices hobble Europe’s economies.
This is all very appealing to traders as what goes up must come down and vice versa.
So, when do you to trade the pivot or the reversal?
As stated earlier, Short sellers are betting that an asset is due to decrease in value and we have our eye on the JPY that is currently on a 24-year low versus the USD.
The USDJPY fell on Wednesday, moving off a 24-year high, after media reports that the Bank of Japan conducted a rate check, an apparent preparation for currency intervention, while policymakers stepped up warnings about the yen's sharp fall.
We await closely any potential (BoJ) Bank of Japan, intervention to alter the current 24 year lows.
Overall, we are on the edge of our seats and are ready to take advantage of shorting the JPY as we believe its just a matter of time. Are you ready?
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