How to Reduce Your Risk in Currency Trading

Pair trading is a popular stock-trading strategy. It gives you the opportunity to capture a dislocation between two stocks by taking a long position in one stock and simultaneously taking a short position in another — in equal dollar amounts. In identifying a good pair trade, you’d look for two stocks that share the same industry, the same sector or simply have a strong historical statistical correlation. Yet for the time being, the share price of one may have gone up (the one you go short), while the other company’s stock (the one you go long) went down. Your trade is successful when…