Skip to Content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View More
Avoiding Tech Tops and Bottoms as Well as Fundamental Long Shots

Avoiding Tech Tops and Bottoms as Well as Fundamental Long Shots

John Kicklighter, Contributor

Talking Points:

• Prudent trading gives equal - or even greater - deference to the risks of a trade as its potential returns

• Chasing extremely volatile or dynamic events for trades is similar to picking tops and bottoms technically

• We consider this for the 'Black Wednesday', the Crimea situation and China's current efforts

See how retail traders are positioning in the majors in your charts using the FXCM SSI snapshot.

Most traders are attracted to volatility and the allure of exceptional potential returns. The risks these opportunities will incur is more often an afterthought. However, a proper appreciation of risk is crucial to longevity in the financial markets. The scenarios with the greatest potential profit most often present with the greatest potential risk - both in terms of probability and notional exposure. When it comes to technicals, picking tops and bottoms is a great example of the pitfalls of skewed trade analysis. Yet, this speculative vice can also show up in fundamental evaluations. Chasing low probability, complex or highly fluid situations can present just as many pitfalls for the market participant. We look at how the Bank of England's dropping the Euro peg, the Iraqi Dinar rebound and Russian Ruble's response to the Crimea affair all fit the bill of distorted risk in the past. We then consider how traders are being drawn into China's interventions now in today's Strategy Video.

Sign up for John’s email distribution list, here.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES