How to make money when something goes down in price

Imagine this: you are a salesman selling washing machines. You can see that they are coming down in price. A couple walk into your showroom and decide to buy a washing machine, and you sell them one for £900. Instead of getting one in from the wholesaler next week for £850, you decide to wait until the beginning of the next month when the wholesaler is selling them for £800. You take the £900 from the couple who ordered the washing machine and tell them that you will deliver their new machine next month. They go away happy, and wait for you to deliver. You are happy because you have made £100 from selling a washing machine, and then waiting a month while washing machines get cheaper and then buying one to sell to deliver to the couple. You just made money from washing machines going down in price! This is called short-selling.

In the same way, I just made £884.60 from sterling (GBP) devaluing against the Australian dollar (AUD). On the 10th Feb I had a signal in my daily trading system that told me GBP was falling in price against the AUD, so I opened a new position, selling the GBP/AUD currency pair. I then waited, and waited... and waited more...until I had a signal that the fall in price had stopped. This happened yesterday, when my daily trading system signalled that the move was over.2016 04 22 GBP AUD

I then 'bought to close' my open position (a bit like going to the wholesaler and buying the washing machine). I made a profit from the difference in price. I made £884.60. Not bad for a bit of watching and waiting. All I had to do was be patient and wait for the signal that the move was over. Being patient can be difficult. It took two months for the trade to run its course. This trade has contributed to my 25% profit so far this year.

Click here to see a video where I discuss the trade

I am not a financial adviser. Financial advisers don't do this sort of thing. They tell you to pay off the mortgage and put money in building societies at 1%. Good sensible stuff. If you do that stuff already and want to learn more about what I do, then consider becoming a member of my website. I talk about what I do, and members can learn the techniques that I use, but remember, it's not financial advice!

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