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Originally Posted by thehawkman  Currencies never go to zero. Commodities and indexes never go to zero either. And besides, the reason I switched to carry trading, was precisely that, all the positions do turn around eventually. |
Not all. Cost of carry is very important because the value of a currency over time is not the nominal value you see on charts but the interest adjusted value. This is why you do need a little preparation before you enter your positions. You need to make a reasonable long term estimate which includes interest rate risk. In terms of the USD/EUR, I think a carry trade is foolish. The euro has weaker long term prospects than the dollar (as far as I can tell), meaning unless there is a significant change in the situation somehow, either its interest rates will fall or its nominal value will fall, in the long term, relative to the dollar. You can still make money if the volatility makes up for it, and within certain time frames the waves will be in your favor but I don't see the point in trading against what you perceive to be the big wave. You can capture volatility from either direction so you might as well capture it from the right one.
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Plus, the so-called problem of averaging down is only one when you're leveraged.
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Leverage is a blessing. Used properly it is your friend. You don't actually need any leverage at all to trade currencies, just like you don't need any leverage to run a retail store, but your return won't be very impressive if you don't use some.
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If you were to average down the EURUSD by buying 5 lots of 10,000 over time at 1:1 leverage, all you'd have is a paper loss.
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There is no such thing as a paper loss when you are trading real money?!
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The planned change in Metatrader, which will average the price of your positions instead of keeping them separate, will only compound the difficulties in making a profit trading.
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It doesn't matter that much how the accounting is done.