How do XM foreign exchange trading experts cover their positions?

foreign exchange marketThere is no absolute best method, only the strategy that suits you best. In XM foreign exchange trading practice, covering a position can be a powerful tool to turn the situation around if used properly; if used improperly, it can also make investors fall deeper into passivity. Closing a position is essentially a passive means of coping after a quilt. It is not the best solution in itself, but it is a relatively reasonable choice in some specific scenarios. Here are the five key points of covering a position summarized by trading experts.

1. It is not advisable to cover the position in the early stage of the continued market downturn.

Most foreign exchange traders understand this principle, but some investors have difficulty accurately judging market turning points. What should they do?

There is a simple way to judge: when the exchange rate is falling less, there is no need to rush to cover the position. If the current exchange rate is less than 5% below the bid price, then an intraday fluctuation may bring the position back to the cost line, and it is not meaningful to cover the position at this time. If the current price is more than 20% to 30% below the bid price, or even the exchange rate has been halved, then you can consider covering the position, because the room for further decline is relatively limited.

2. No replenishment will be made when the market as a whole has not stabilized.

When the market is in a downward channel or a staged rebound, it is not suitable to cover the position. Because further weakening of the index will drag most instruments down together, with the possible exception of a very few currency pairs that have strengthened against the trend.

Traders usually choose to fill their positions when the index is relatively low or just shows an upward reversal signal. At this time, the upside potential is large, the downside risk is small, and the fill operation is relatively safe.

3. Weak varieties are not replenished.

Especially those currency pairs that do not rise when the market goes up, and follow when the market goes down. The purpose of making up a position is to use the profits of later purchases to make up for the loss of the previous quilt cover variety. In this case, there is no need to just focus on the original quilt cover variety.

It is not crucial what variety to choose to make up the position. The key is whether the variety to make up the position can bring the maximum profit, which is the direction that needs to be prioritized. Therefore, make up positions should choose relatively strong varieties rather than continuously weak varieties.

4. Varieties that have risen too much in the early stage will not make up for it. In history, there have been some very prominent varieties that have entered a long-term downturn after a short period of shining. This type of foreign exchange tends to make up more and more sets, and the deeper the sets become, eventually making it difficult for investors to get out.

5. Seize the opportunity to replenish the position and strive to complete it at one time.

Never make up your position in sections or step by step. First of all, most investors have limited funds and cannot withstand repeated low-cost operations.

Secondly, the cover itself is a correction of the previous wrong buying behavior, and it should not evolve into a second wrong trade. The so-called step-by-step cover is often an excuse for the previous imprudent buying behavior. The result of multiple cover positions and more cover-ups will only put investors in a difficult situation.