“Once bitten, twice shy” resonates pretty strongly with forex traders – most investors, in fact – in the current environment we find ourselves in. Things are starting looking up, in general, but some have been badly burned. This can produce fear, and the unwillingness to open positions. Paralysis, one might call it. However, there are opportunities currently. More and more forex traders have been taking them lately…against the US Dollar.

Just take a look at the Volatility index, courtsey of Yahoo Finance:

Yahoo finance Volatility Index

See how much it has fallen in the last week. That’s fear leaving the market, slowly being replaced by growing confidence. The mood is bullish…enough to allow the market shrug off some bad news.

The effect is evident on our Forex Pairs. EURUSD, GBPUSD, AUDUSD, NZDUSD etc. They are all up. The general consensus at the moment is that they will continue to rise, as long we don’t get any major negative news. However, since we have established previously that this thing is not completely over yet, there will still be some bad news to come. Care is still required.

How much care though? Some longer term traders – along with learner traders – have lost money in this environment. The quote “Nothing ventured, nothing gained” comes to mind. You have to put your money where your mouth is, or you’ll never make progress. The key is MONEY MANAGEMENT. If you ensure that you only risk 2-5% of your account per trade, then chances are that you will have many-an-opportunity to make some profit.

Don’t get greedy, even when things seem good.

Happy trading

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