The increased market activity opens up many opportunities for earning. But remember that the methods and strategies that worked back in 2019 will cease to be profitable and might cause a complete loss of your investment. If you want to take advantage of the current state of things and make good money, it’s worth taking a closer look at the current world situation.
What’s Going On With the Economy
There are only two main reasons for the dramatic changes around the globe:
- Oil prices
- Coronavirus
The global nature of these two events entails a huge number of other changes, provoking the so-called domino effect.
The world is on the verge of a recession. Analysts portend a widespread economic slowdown in the nearest future.
The Oil Situation
Oil prices have always had a direct impact on the level of the economy in leading countries-producers and countries-consumers. Because of the pandemic, the amount of black gold consumed has plummeted worldwide, including China, which used the largest percentage of this fuel before the virus spread.
In addition, Saudi Arabia, which ranks second for black gold in the world after Venezuela, has announced a policy of cheap oil. Many countries agreed to lower levels of oil mining.
As a result, oil prices began to decline sharply. Today, the rate dropped to $30 per barrel. This has a direct impact on the rate of the US dollar, as well as on the prices of currencies from countries with the highest levels of oil production and consumption.
The COVID-19 Pandemic
Perhaps this is the most significant event over the past few years and it inflicts a crushing blow to the global economy on all fronts:
- Business activity dropped sharply due to announced self-isolation measures
- The level of travel and supplies fell
- Many small and medium-sized businesses suffer and close
- The number of flights has decreased and thus all airlines, except the largest ones, might close
- Countries that received a significant percentage of tourism profits suffer losses
- In many countries, large-scale production stopped, etc.
Since the beginning of the pandemic, for obvious reasons, people began to earn less, spend less, use infrastructure rarely, pay fewer taxes, and so on. This causes a collapse of the economy and, as a result, a sharp increase in volatility in the Forex market.
Some consequences don’t occur instantly. They should be expected later. As an example, we can use the fashion industry. As a rule, the production of clothes for the fall-winter season, which is announced in August, is ordered back in February. The vast majority of goods for the mass-market are produced in China, where all plants were stopped right at that period. As a result, the clothes that were expected in August will come with a delay or will be of poor quality, which can greatly affect sales.
Forex Trading Strategies
It is quite obvious that along with changes in the market, the trading methods must also change. If you want to continue earning, then you need to reconsider your strategy. This should include both the trading plan and your Expert Advisors if you use them. Diagnose both. Assess their profitability at the current level of volatility. Adjust your plan and Advisor. If this is not enough, replace them with new ones.
Strategies that are designed for active price movement will show the best results:
- Trend trading
- Scalping
- Breakout strategies
Particularly careful should be the traders that used to make money on averaging strategies, such as martingale. They work on a belief that the price will return to the average. Until recently, these strategies brought huge profits. Due to the high volatility, the price will not return to previous levels. And because of the aggressiveness of such strategies, you risk losing your investment if this has not happened so far.
The sharpest jumps in the market will soon cease, however, high volatility will continue. Martingale traders should change their strategy or abandon trading altogether.
What To Pay Attention To
Right now, fundamental analysis plays a huge role in Forex. Things that affect countries with the highest levels of the economy inevitably affect currency rates. For example, the United States has already reached a 3rd place in the number of patients with coronavirus. This affects the level of the economy both in the country itself and around the world.
Mainly, try to pay attention to the following indicators:
- The number of cases of infection and deaths from COVID-19
- Oil prices
- The main economic indicators of the developed countries - GDP, level of production, etc.
Due to the high volatility, interest in the market has increased, which led to a growth of liquidity. You have a chance to take advantage of the unfavorable situation around the world and enlarge your profits in order to survive the impending economic crisis. Adjust your trading strategy with the latest changes, delve into the fundamental analysis, and start making real money.