Forex Articles - Protecting Yourself from Financial Crisis with Forex

During the present global financial crisis, traders and investors are forgetting the question “How do I earn more money?” and are asking the question “How do I protect my money?”. The current situation on the Forex markets allows combining of these two questions in one because with the right strategy and information you can still profit from your investment and at the same time to protect yourself from the crisis by staying well capitalized in the background of the global financial chaos.

Every professional economic analyst and financial consultant will state that the most profitable currencies during the current crises are the US Dollar and the Japanese Yen. The reason for their strength is the seeking of underestimated assets in times of serious financial shocks. While some of the investors are trying to get rid of the risky assets – the biggest reason for the increasing price of the US Dollar – others are buying American and Japanese securities and treasury bonds as the safest possible investment. This is the main reason for increasing the price and strength of the Dollar and the Yen, because they are used for buying the securities and bonds.

All these things lead to the conclusion that while the crisis is present, the Dollar and the Yen will be strong compared to the other currencies. The Yen’s price will increase a little more that the Dollars price because it has a more risky nature than the US Dollar. That’s why investors who want to protect their capital during the crisis sell USD and JPY based currency pairs.

Depending on the available capitals, every investor can open long-term short trades in currency pairs like EUR/USD, GBP/USD, EUR/JPY, GBP/JPY, AUD/JPY and NZD/JPY with or without margin leverage. The main idea here is to leave these trades open without “take profit” levels because the purpose is not to make profits from these trades, but to hedge other assets. It is also not recommended to place a “stop loss” on your open trades. Instead you should close these trades manually when the crisis is over. It is not necessary to react on the daily changes in the prices of the currency pairs. What you need to do after you have such hedging trades is to monitor the major picture of the markets and close the trades when the crisis is really over.

It is recommended to keep the trades open until all the signals for economic problems disappear completely. Many experienced traders and analysts know and use this technique to hedge the risk against the crisis. We hope to be of assistance to those who are not familiar with the functionality of the Forex market and don’t know how and when to act. This is an excellent opportunity to use the Forex market to your advantage.
Bear in mind that this recommendation is intended for conservative investors who dont want to take unnecessary risks and just want to protect themselves and their money during this economic crisis.

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