The ban imposed by some European regulators on selling of shorts is a great opportunity to remind everybody that in forex trading, no such ban is possible. This is one of the great things in currency trading over stocks.
Most investors in stocks don’t use shorts, but rather buy them, hoping they will go up. A smaller portion of more speculative investors use shorts. The authorities point the finger to these speculators, as if this will solve the banking problems.
This ban on short selling imposed in some European countries on specific stocks is expected to restore confidence, or at least stabilize the markets. This has failed in the past and is likely to be lifted after the 15 day period expires.
In the past week, there is growing interest in forex trading. Every time there is a crash in stocks, interest in forex grows as a better alternative. With the short selling ban, it can become even more popular.
Shorting a currency pair is very common in forex trading, and more or less speculative than placing a long position. When one currency goes up, another goes down. This is trivial to forex traders, but not always known or understood by newcomers.
I hope that a positive result of this ban will be more interest in forex.
It is of course important to stress: the volatility in the markets is very high at the moment. This is a result of the big flow of news regarding the debt crisis, the US downgrade and more. And it is also a result of relatively low trading volume in the markets. So, trade with care and keep leverage limited.
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