There is no denying how catastrophic 2020 was to the global economy. Every business from revenue giants in the automotive industry to textile companies bore the brunt of the Coronavirus pandemic. Especially hard hit was the Forex industry, as stocks plummeted and the market became more volatile than ever before.
Nothing devastates a market quite like instability and constant trade disruptions. These were two of the primary reasons the FX market was murky and difficult to navigate.
Fast forward to 2021, and the market has begun its gradual recovery. As industries begin to re-open and regain some level of normalcy, things are looking up. For FX lovers, trading is now seemingly lucrative, and the global market is stabilizing after lengthy periods of uncertainty. With that said, it is impossible to note that tactics and strategies have changed substantially since this period.
This change has necessitated a change in tactics for people looking to try their luck in Forex Trading.
What does this mean for you as an individual trader? In principle, ensure your trading plan is structured to withstand certain prime events. Always have your ear to the ground for pandemic news, political events, and trading relationships between key players in the Forex market.
States such as the USA, EU, China, and Japan are key players, and how amicable their trading circles are should influence how you draw strategy. There are many other factors to consider, like central banks, hedge funds, and investment banks, but that is a story for another day.
The Current State
While most large-scale investors are still wary, individual traders have seen potential in the emerging normalcy. As trade floors open up and generate market stability, it is now time to move in for the kill. How successful you are as an FX trader will ride on how efficiently you monitor emerging trends. It all boils down to how well you adapt to specific market dynamics.
Choosing a Successful Strategy
First, there is no quick fix for trading. Your strategy should accommodate current trends and cushion you against future fluctuations. It will take time before you get a list of full-proof techniques that will guarantee success. Before going any further, there are two tactics that you need to be aware of;
- Technical analysis: Analyzing price trends to make accurate predictions. The Utilization of well-researched historical price analytics to predict future trends.
- Fundamental analysis: Determining a stock’s market value by analyzing macro/micro-economic factors, historical price trends, and even industry conditions. Essentially, it is a system that evaluates all the economic and financial factors that influence a particular stock.
As an individual trader, you will need to build a strategy utilizing one or both of these tactics. Note that market forces will influence your trades, so you need to play it smart. So, what is the best way to navigate the FX market?
Crucial Trading Tips
A no-risk/no-reward approach is a poor strategy in FX trading. While this is true in some circles, it can ruin you in this sector. The principle here is to establish an approach that covers the downside. It means that if a trade sinks, the losses you incur are manageable. Risk management involves evaluating associated risks, such as currency fluctuations, interest rate changes, liquidity, and leverage risks.
Always ensure you understand the risks involved before you trade, then draw a plan that certifies the mitigation of any negative impact.
Evaluate Market Volatility
Always trust your gut. There are scenarios where events have influenced the market to a point where it is impossible to predict a trend. If you are about to trade a stock in such circumstances, don’t. Trade when there is relative market stability or when you can accurately predict a pattern. Nothing is riskier than excessive volatility.
Invest in a Trading Plan
Always have a plan before you make any trade. The function of a trading plan is to provide a system that helps you build a strategy. In principle, a trading plan answers four fundamental questions;
- When is it safe to trade?
- Why should you trade?
- What to trade?
- How much to trade?
Essentially, a trading plan is the culmination of extensive market research, allowing you to make intelligent trades and reduce the risk margin.
Monitor International Events
As mentioned earlier, several factors influence currency pairs and their subsequent trading patterns. To ensure you always have the upper hand, monitor political events, trading relationships, major central bank decisions, and announcements.
Keep Your Emotions in Check
Finally, it is surprising that in individual trading, you are your own worst enemy. Frustration, greed, and anxiety will influence your choices and ultimately affect your ability to impartiality. Always trade when you’re in a clear head-space.
Forex trading can be a gold mine for you, but only if you have the correct strategy and a clear trading plan. All you need is patience.