Wednesday morning and the motto on the face of every dollar denominated bill, “in God we trust”, seems naïve at best and hypocritical at worst. Then there is the GBP “we promise to pay the bearer on demand”. How much is that promise worth? Well a pound obviously, but is it a promise they can keep?

Huge drops in both the GBPUSD and EURUSD cables yesterday reflected the fear and lack of confidence all around the world financial systems. It plummeted by 390 pips in less than an hour for the GBPUSD. Wow! You would be ‘quids in’ if you had an open short position in either currency pair. Of course you would be sweating if you held long positions. Trust and confidence are in short supply.

You can lose a small fortune as you learn forex. If you are new to forex trading be sure to concentrate on your practice account to build your own confidence before diving into the real thing.

Of course with forex trading timing is very important. That extreme movement happened just after 2pm GMT when the American markets were in the early minutes of trading. Times of important announcements and in these volatile times even market opening times are signals NOT to trade and thereby avoid huge potential losses.

In the long term, weeks and months, the USD is a good long speculation. America leads the economic world and will therefore move from recession to growth much earlier than other currency areas.

So what should your forex trading strategy be just after dangerous times? A signal that things are settling down is the first five-minute candle is contained within the preceding five minute bar. With the GBPUSD cable the next bar becomes the interesting one. Buy when it goes above the previous bar high or sell if it goes below the previous bar low. Limit losses with 25 pips. I call these ‘whiplash’ trades.