There is no best way, only the most appropriate way.
As long as the use of appropriate, is a sharp tool;
If not used properly, it can also become a breeding ground for its own pitfalls.
Covering a short position is a reactive strategy after being trapped.
This is not a good way to solve the problem, but in certain situations, it is the most appropriate way.
Now, let’s take a look at five tricks traders use to cover their positions.
1. You cannot cover short positions at the start of a bear market.
Speculators understand this, but some small retail investors can’t tell the difference between bull and bear turning points.
There is a very simple way to do this: don’t cover short positions without a big drop.
If the current 5% lower than the grid, there is no need to cover, as any intraday shock may be uncapped.
If the current price is 20% to 30% lower than the purchase price, or even some exchange rates are significantly reduced, you may consider covering your short position, as the room for further market declines in the future is relatively limited.
2. Not covering short positions When the market is in a down channel or relay rally, it is not possible to cover short positions as further declines in the forex index will drag down most but a few strong currencies that bucked the market.
The best time to cover a trade is when the index is at a relatively low level or just reversed upward.
At this point, the upside potential is huge, the downside is minimal, and covering is safer.
3. Weak currencies do not cover short positions.
Especially currencies that don’t go up when markets go up and don’t go down when markets go down.
The purpose of covering a short position is to use the profit after covering a short position to cover the loss of the covered currency before covering a short position.
In this case, there is no need to limit yourself to the variety of original quilt cover.
It is not the choice of varieties to cover the short position, the key is the varieties to maximize the profit, this is the key consideration.
Therefore, in order to cover the position, we should cover the strong currency rather than the weak currency.
4. Early Surge Super Dark horses don’t cover short positions History has seen early surge super dark horses fall into darkness after a brief burst of brilliance.
The currency will only go deeper and deeper into the mire.
5. Seize the opportunity to cover short positions, and cover short positions step by step in a single position.
First of all, ordinary investors have limited funds and cannot afford multiple amortization operations.
Second, covering is to make up for previous bad buying and should not itself become a second bad trade.
Stepwise covering is a justification for careless buying.
If you cover your short position too many times, the more you cover the cover, the result is bound to leave you stuck.
As Europe’s energy crisis intensifies supply constraints, oil prices have enjoyed a third straight pre-Christmas rally and gold has held steady.
Please pay attention to the specific operation, the market is changing rapidly, investment needs to be cautious, the operation strategy is for reference only.
