There is a common trading strategy in forex trading - covering a short position.

Covering a short position refers to the "passive" buying behavior in order to reduce the holding cost when the wrong time to buy falls.

It can be said that covering is the most common passive response strategy after most investors are locked up, although this operation strategy itself is not the best way, but it is the most appropriate method in some specific circumstances.

Technically speaking, there is only one situation in which you can cover a short position. That is, within their own established operating period, the varieties bought are losses in the process of rising trend, in order to cover positions! Cover under any other conditions, will only sink deeper and deeper to expand the loss, the right way, is to stop the loss in time!

But in reality, because of disposal efficiency (disposal effect refers to the phenomenon of investors selling a winning stock too early and holding a losing stock for a long time), most investors may be easy to stop profits but difficult to stop losses.

Therefore, the common problem encountered by investors may be that after being set, in the hesitation step by step, it has been from the shallow set to the deep set, and the meat is no longer advisable. So what are the techniques for covering positions in this situation?

1. Do not cover positions before the trend has stabilized. When the market is low and continues to fall can not cover positions, there is no clear rebound signal will continue to fall. Covering positions is generally selected when the market is relatively low or when the signal is obviously flipped. At this time, the room for rising is large, the possibility of continuing to fall is small, and the risk-return ratio is suitable for covering positions.

2, the trend of weak do not fill. Some varieties, the market rises it will fall against the trend, and the market falls more sharply, then this type of variety is obviously weak, there is no financial attention, there is no need to cover positions. So choose a relatively strong variety to cover positions.

3, must remember, must grasp the opportunity to supplement, only make up once, can not fall more and more make up, into revenge trading. Why is it best to control only one cover, because on the one hand, our funds are limited, on the other hand, covering is originally a make up for our wrong judgment on the timing of buying, so the moment we are determined to cover is an opportunity for our redemption, but we must not blindly continue to cover mistakes.

All in all, we have to understand that the reason for covering positions is also to make money, if you do not have a greater grasp of the profit of the transaction, you can not cover positions in order to cover positions. After all, if you want to make stable profits, it must be a small loss, plus large and small profits, accumulated many times, must not cause a large loss because of a small transaction due to multiple cover positions.

There will always be profits and losses to make transactions, and behind the profits and losses, how to stick to their own hearts and strictly implement their own trading system is the king of money!