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Originally Posted by Peterw  So now the idea is to trade the pairs and not the carry? |
Did you read a single word I wrote?!? The interest rate differential is important because it offsets the nominal price depreciation. It is not important in itself. Trading in favor of the carry instead of against it is simply a risk management tactic. One which needs to take other factors into consideration but which is a pretty effective tactic in general.
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In the case of aud/jpy would you recommend going long or short right now?
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Unless I see some truly amazing, cheap androids being mass manufactured in Japan, I would not dare take a short position in this pair, ever.
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And how about stop losses?
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I would not use stop losses.
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Still for people who don't know what they're doing?
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Yes.
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How would you handle that massive dip and current down trend?
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I would average down the entry price for going long and average up the exit price for retreating from the long position.
What this means in practice depends on how much capital you have, the minimum lot size you can trade and the leverage you have available.