Market Volatility Spells Trading Opportunity
These are certainly strange and uncertain times as of late
COVID-19 has wreaked havoc across the globe with over 204,000 cases reported worldwide and over 8,000 deaths.
The ongoing pandemic has seen many governments place its people in forced quarantine. This started in China, where the pandemic started in the city of Wuhan with a population of 10 million people. Then we saw countries such as Italy, the hardest-hit area in Europe, follow suit.
There have been mass cancellations of sporting events and public events globally to reduce mass gatherings of people. Schools have been closed, transport links disrupted, flights cancelled and staff being sent home from work to either work from home or have time off.
Whole regions such as the
Lombardy region in Northern Itay have been completely isolated and completely
locked down with more countries and regions expected to follow suit. These are
all measures put in place to help slow down the rate of infection.
The province of Hubei, where the virus originated, has been cordoned off. It is said that China has now curbed the virus and are getting over the worst of it. President Xi Jinping visited Wuhan to show Beijing that the situation was under control and to show solidarity to the Chinese people.
That being said, the impact on the global economy has been hammered in recent weeks. Massive companies such as Tesla, Apple, Microsoft and Samsung all have factories in China which have been closed. This could lead to a significant slowdown in Chinas overall GDP or even recession!
The USA has dropped interest
rates to 0% and the UK Government has put in place a 'Mortgage holiday' -
freezing mortgage payments for the next 3 months in an effort to alleviate
financial strains on families.
Taking advantage of Market Volatility
We have witnessed some of the biggest falls in stocks and shares valuations since the 2008 financial crisis.
But it's not all doom and gloom...
A fantastic way to capitalize on market volatility is trading CFD's!
Across the board we have seen stocks plummeting, Currencies weaken and even Bitcoin price down to around $5k from $10k only 2 weeks ago.
This month the Dow is down -16.42% staying on track for its worst month since Oct 1987 when the Dow was down -23.22%.
For the year, the Dow is down -25.58% which keeps it on pace for the worst year since 2008 when the Dow lost -33.84%.
Just because the markets are crashing does not mean there is a lack of opportunity in the marketplace.
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Impact on currencies
Recently we have seen that Oil Prices are down, Stocks are down and we are witnessing a decelerating economy.
A decelerating economy should, in theory, weaken the currency of that particular country. With that being said, a global crisis where the majority of the powerhouse economies are affected could mute the Forex market. There has been less volatility in the currency markets in recent days.
Crypto markets have not been so steady. Bitcoin, the baseline digital asset, has had its value cut in half in recent weeks. There was a high of $10,000 in January and we saw a low of around $3,000 a few days ago. The valuation will most likely come back to highs as Bitcoin is a shrinkage market with a maximum supply of 21,000,000 with 18,276,075 in circulation. Only 13.87% of Bitcoin is left to be mined which many commentators suggesting a price hike before the mining reward is no more.
The ongoing Coronavirus could
impact certain currencies drastically however some countries which have felt
little to no impact of the virus could see very little change in valuation.
Traders may wish to revisit their trading strategies as countries that are
making daily headlines with increased cases of infection, could see a spike in
It is important to remain calm as a trader in unpredictable times such as these. Take a step back and do some research into what is happening globally and how markets could or will be affected.
In uncertain times it is paramount to keep up to date with the latest news releases as this will affect your trading decisions.
With no signs of the pandemic slowing, traders need to source their information diligently as to be as well informed as can be.
Keep up to date with all the big
happenings around the world using the EagleFX
Daily Analysis page and the Economic Calendar. Analyse
latest markets with news clips and interactive charts to give you a firmer
understanding of market volatility. The Economic Calendar serves to guide you
on the latest Government announcements which will impact market movements. Sign
up is free!
The deadly strain of flu virus currently circulating is wreaking havoc on markets globally. History has taught us that markets do recover. When we look at previous pandemics such as SARS, Swine Flu and Ebola, there is evidence of an initial market downturn yet markets fight back.
While we are in the height of this global pandemic, traders must stay current to make the best decisions when trading Forex and other CFD's. Monitor global news and monitor which countries are making headline news whilst taking note of countries which are popping up more often in media posts. All this information will best equip you when deciding to long or short a currency.
With volatility, comes opportunity!
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article was submitted by EagleFX.