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How to Trade on China's Slowing Economy

Beijing, China
AP
Beijing, China

China's red hot economy is cooling, and this strategist has a way to play it.

Remember when China's economy was hotter than hot? Not so much right now, and Todd Gordon, co-head of research and trading at Aspen Trading Group, has a way to play that using currencies.

The Shanghai A shares index and the Australian dollar have been trading in tandem for months now. And as Chinese inflation has slowed and worries have mounted about the property sector there, Australia - a major trading partner - has felt the effects, and the Aussie has slipped.

"China is leading the way down, so a great corollary to play that is the Australian dollar," Gordon told CNBC's Melissa Lee.

Gordon recommends selling the Australian dollar on a bounce, putting on half your position at 0.9700 and the next half at 0.9800.

He wants to set a stop at 0.9985 and take profits at 0.9200.

"I think this is something more than cyclical. I think this is a structural change," Gordon says.

"Risk aversion is here."

Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm and repeats on Saturdays at 7pm.

Learn more: The essential vocabulary for currency trading is on Key Currency Terms. Top currency strategies are broken down for you in Currency Class.

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