The COVID-19 crisis pandemic has taken a heavy toll on the economy at large. On the whole, expectations suggest growing caution and uncertainty. Against this background, it comes as a surprise that Forex trading is booming worldwide.
The foreign exchange market, despite being very likely to fail as compared to other markets, has remained stable during the health crisis. It has been attracting a lot of interest from traders, who have been overexposing themselves with high leverage.
According to the experts at Business Review, the growth rates are more pronounced in developing countries, of which mention can be made of Eastern Europe, Africa, and Southeast Asia. As far as traders are concerned, they are preoccupied with “safe-heaven” commodities and currencies.
While it is soon to tell, it is believed that traders are moving away from stock trading and looking to identify new income streams because they have more time on their hands.
At present, there are more players in the FX market than ever before. Individuals are getting trained online to be able to gain access to financial markets. It can be concluded that the COVID-19 pandemic has not affected the foreign exchange market as it has done with other businesses.
The effect of the global pandemic is only visible in the high price volatility, which can ruin some strategies. If you understand the basic notions of Forex trading, you have what it takes to prevent loss and turn a profit.
Strategies You Can Use to Counter The Coronavirus Effect in The FX Market
Forex traders are put in the situation of navigating formidable market conditions. It is necessary to seek practical solutions to ensure continuity and resilience.
Given that the exchange rates may fluctuate considerably post-COVID-19, traders may want to change their strategies to sustain success. Knowing how to develop appropriate and effective strategies to manage change in the FX market is a must. More exactly, it is essential to adjust the approach to trading in the foreign exchange market.
Would it not make sense to continue trading as usual? As a matter of fact, no. The fact is that there is no more business as usual, so anyone looking to survive in the post-COVID-19 era has to build a trading approach around a solution that meets the current market needs. The period of low volatility is over and traditional strategies will no longer be relevant in the current circumstances. Key strategic priorities have to be modified in a profound way.
Let us take a close look at the trading strategies that can help you manage risks post-COVID-19.
Trading USD/JPY Volatility
The US dollar/Japanese yen has certain hours that are acceptable for buying and selling currencies because there is a sufficient degree of variation of the trading price. Price movement is relatively stable throughout the day. Nevertheless, trading this currency pair between 21: GMT and the Tokyo open at 00:00 GMT is not recommended.
The USD/JPY pair is dependent upon fundamental analysis, so deploy indicators such as Bollinger Bands and Keltner Channels. Carefully analyze the situation and place a stop loss when the security reaches a particular price.
Closing Before the Weekend
At the end of the week, you will have to make a hard decision. You either hold your positions or close them daily so that you will not have any trades.
The FX market does not close during the weekend, yet additional risks emerge. Maybe you have your eyes set on EUR/USD. Instead of calling it quits, you hold on to your position. Over the course of the weekend, there is a sudden drop in value and the only option you have left is closing the trade and taking the hit. The point is that you should close trades an hour or two before midnight.
Switching to Cryptocurrencies
Gold prices fell last week and the reason why gold has not capitalized is that risk appetite is not strong. Silver and platinum prices are set to climb, yet it is not certain that these two commodities can hold their lead to bring repayment.
You are better off trading cryptocurrencies. Digital currencies will play a huge role in the years to come as the global economy is struggling to recover from the ill-effects of the ongoing health crisis. Blockchain, as well as digital asset technology, will be used in the process of settlement. You can transact by exchanging one cryptocurrency for another.
Plus, you can take part in leveraged trading via a margin account.
The foreign exchange market has been robust in the past couple of weeks demonstrating that it is capable of sustaining a considerable spike in activity. Traders should take advantage of post-COVID-19 trading opportunities. Buying and selling currency is the best passive income source during these tough times.
Find Out If You Have A Winning Forex Trading Strategy or It Is Out of Date
The smart thing to do is to use a system that has a proven track record – in other words, which shows a consistent winning average of above 50 percent. Or you can develop your own trading strategy if your current one is out of date.
If you have a strategy based on a calm foreign exchange market, change is paramount. The largest financial market in the world has changed forever as a result of the COVID-19 pandemic, which means that what has worked before will not work any longer.
So, the Forex trading systems used at present will soon become obsolete. What you need is a plan of action that exploits market inefficiencies. Winning in the foreign exchange market is dependent upon the strategy that you apply.
But what makes the difference between a losing and a winning trading strategy? High accuracy performance, of course. A good Forex trading strategy will undoubtedly yield positive results and prevent big losses.
It is hard, if not impossible to forecast what will happen in the Forex market in the following years. It is expected that volatility will remain high and the trading volume will not decrease. It is possible to trade profitably, but you have to adjust your strategy in these uncertain times.