Kevin Mastaw

Let Waiting Build You Wealth

The movement of the AUD/JPY, this week, illustrates why patience and pair choice is critical for building wealth in forex trading.

At the beginning of every week, I look at the Monthly Chart of my favorite carry trade pair, the AUD/JPY. 

It’s been lounging for several months at the bottom of a upward trending channel that extends back to 2002.

Before opening or adding to a long position, we want to see how it behaves for the next few weeks. For instance, the action of this week illustrates three important points why. 1. We need to wait for confirmation that the pair is going to act the way we think it’s going to act. We expect AUD/JPY to continue to trend higher into the channel on the long term (monthly) chart. However, this week it continued to follow the top of the downward trending channel on the daily chart.

Until we see a break out of this intermediate trend, we take no action.

2. Failing to be patient costs you money! Had you gone long on Monday or Tuesday - May 5th or 6th - you would be under by $200-300 bucks for each mini contract if you were still in today. 

3. With this pair and any carry trade pair your losses are mitigated by the daily interest. Even if you were long AUD/JPY this week, you'd have picked up interest in your account. Triple on Wednesday.

And if you are wise, you have but a small position relative to your account size. So, you may actually want to add to your position, early next week. But keep it tiny! There could still be some downside in the near term. The lesson is patience, grasshopper, patience!

Source: Free Articles from ArticlesFactory.com

ABOUT THE AUTHOR