Going Short – A Difficult Trade

I have been struggling with “going short” all week. Not in the conventional manner as in “selling a stock short” – but more so with consideration to “getting short” on risk.

For the most part “long trades” are considered bullish and are taken when traders feel that markets (and risk) are going to move higher – where as “short trades” are bearish and are taken when traders feel markets are making a turn to the downside. There are many ways to play it – through inverse or bearish ETF’s or possibly through the purchase of instruments that perform well in times of risk aversion (many feel that gold is a good play in this instance).

Via currencies I have chosen to “buy JPY” as it is considered a safe haven currency – and is generally bought during times of risk aversion. Any way you cut it, the idea being that investors would be seeking safety – and that “going short” would be the trade of choice.

This has not been easy.

Markets have traded within a very tight range (sideways) for nearly two full weeks! And regardless of some great intra day trades and profits (which I’ve had to work very hard at) it’s been near impossible to hold on to any position of size for more than a couple of hours or so – before it’s either back to break even, or worse – going against me.

My indicators ( and my gut ) keep me on the short side regardless. I will endure this mornings barrage of U.S based news and evaluate from there.

I’ve layered in to a couple of long JPY trades here over the past 24 hours that will either make me a great deal of money or (at the worst) cost me 2% of my account (not bad considering I’m up over 4% on the week anyway) so…..

Stay tuned for some fireworks.

Getting short…and “staying short” – is a very, very difficult trade.

The Psychology and Mechanics of Staying Short in Sideways Markets

Why JPY Remains the Ultimate Safe Haven Play

The Japanese Yen’s reputation as a crisis currency isn’t built on sentiment alone—it’s rooted in fundamental mechanics that most retail traders completely overlook. Japan’s massive current account surplus and the country’s status as the world’s largest creditor nation create structural demand for JPY during uncertainty. When global risk appetite deteriorates, Japanese investors repatriate capital from overseas investments, creating natural buying pressure on the Yen. This is precisely why I’m doubling down on long JPY positions despite the sideways chop we’ve been experiencing.

The carry trade unwind is another critical factor that hasn’t fully played out yet. For years, investors have borrowed cheap Yen to fund higher-yielding investments in emerging markets and risk assets. When volatility spikes and correlations converge to one, these trades get unwound aggressively. We saw glimpses of this during the recent market tremors, but the full unwind hasn’t materialized. The moment it does, JPY strength will be explosive across all pairs—not just against the dollar, but particularly against commodity currencies like AUD and CAD.

Reading the Sideways Grind: Market Structure Tells the Story

Two weeks of tight range trading isn’t random noise—it’s institutional positioning at work. The smart money doesn’t telegraph their moves through dramatic breakouts anymore. Instead, they accumulate positions slowly, keeping volatility suppressed while they build size. This sideways action we’re seeing is classic distribution behavior, where large players are methodically offloading risk assets and rotating into defensive positions.

The technical picture supports this thesis completely. We’re seeing lower highs on risk-on currencies like EUR and GBP against JPY, while the ranges continue to compress. This coiling action typically precedes significant moves, and given the fundamental backdrop, that move should favor safe havens. The challenge isn’t identifying the direction—it’s surviving the whipsaw action before the real move begins. This is exactly why I’m comfortable risking 2% of my account on these layered JPY positions. The risk-reward setup is asymmetric in our favor.

Macro Headwinds Building Momentum

The broader macro environment continues to deteriorate beneath the surface calm. Central bank divergence is creating structural imbalances that can’t persist indefinitely. The Federal Reserve’s aggressive tightening cycle is starting to bite, with credit conditions tightening and lending standards rising sharply. Meanwhile, Europe faces an energy crisis that’s far from resolved, and China’s economic reopening story is already losing momentum based on recent PMI data and credit impulse indicators.

Corporate earnings revisions are turning negative across major economies, yet equity markets remain stubbornly elevated. This disconnect between fundamentals and price action creates the perfect setup for a risk-off move that would benefit safe haven currencies dramatically. The bond market is already signaling distress with yield curve inversions deepening, but equity markets haven’t gotten the memo yet. When they do, the JPY strength we’ve been positioning for will accelerate rapidly.

Execution Strategy for the Short Bias

Timing short positions in this environment requires surgical precision rather than broad strokes. I’m focusing on specific pairs where the technical and fundamental alignment is strongest. USD/JPY offers the cleanest setup, with the pair struggling to maintain momentum above key resistance levels despite dollar strength elsewhere. EUR/JPY provides even better risk-reward given Europe’s structural challenges and the ECB’s limited policy options.

Position sizing becomes critical when holding through this type of sideways grind. Rather than going all-in on single entries, I’m layering into positions as the ranges develop, using each bounce off support as an opportunity to add to core positions. This approach allows me to average into better levels while maintaining strict risk parameters. The key is accepting that individual trades might scratch or show small losses, but the overall position structure will profit handsomely when the range finally breaks.

The market is testing our conviction, but that’s exactly when the best opportunities develop. Staying short requires discipline and patience, but the setup is too compelling to abandon based on a few days of sideways action.