Thursday, August 18, 2022
Thursday, August 18, 2022
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What has COVID Taught us About Forex Trading?

by James Musoba
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The world faced many difficulties following the outbreak of Covid, with stock markets, forex markets, and other related financial markets plunging to new lows. Many of the economies have recovered somewhat from the after-effects of Covid. However, many nations are still reeling under the impact of the pandemic. Investors tend to depend on a reliable and safe currency during a significant crisis. One currency gained during the initial part of the Covid outbreak is the US dollar. There was a massive demand for the US currency, with the jittery investors putting their money in a safe option.

If you are a beginner in the industry, you need to understand the forex market. There are many forex-related websites and financial publications that give insights into the performance of the forex market during the uncertain times of Covid. It will also indicate how the forex market bounced back from the major crisis in the financial world. If you are looking to enter trading to learn more about the industry, there are some reliable forex brokers apps in the market. Such apps offer an opportunity for a new investor to learn more about the forex market. This article looks at the various lessons learnt by the forex industry during the Covid crisis.

New Clients

The outbreak of Covid has created panic in all financial markets, but according to some reports, the forex industry survived the onslaught. Some forex brokers said they added many new clients during the period. The trading volumes have also increased for many brokers. One of the reasons could be the interest of new investors to move their money from stock markets to new arenas. Many stock investors took an interest in the forex market and put cash in forex trading in the last two years. Some investors consider it an opportunity to learn the trading strategies of a new industry.

Fed Move

When EUR started to weaken following the Covid outbreak, the US Federal Reserve made a swift move by cutting the interest rates. By March 2020, the interest rate was nearly zero. Following the Fed move, the rate between euro and dollar stabilized to its earlier levels.

Euro Performance

During the initial stage of the coronavirus, the euro weakened considerably against the dollar. Before Covid started affecting the United States, its impact was severe in Europe, especially Italy. After reaching its lowest level on March 20, the euro gained more than 10 percent against the dollar by the end of August. However, the surge in the euro was temporary as the increasing Covid cases, especially in Spain and France, adversely affected the chances of the currency. 

Delta Variant

Investors consider the dollar a safe option, especially during a world crisis. On August 28, 2021, it touched a fresh 9-1/2-month high because of the concerns related to the arrival of the Delta coronavirus variant. Apprehensive investors prefer investing in a safe currency such as the dollar. On the other hand, Australian and New Zealand dollars, considered risk-sensitive currencies, fell sharply on the same day.

Uncertain Element

Investors should be ready for significant upsets in the market, considering the volatile nature of forex trading. When we have a pandemic in the scale of Covid, which has battered the life of people across the world for the last few years, financial markets are bound to respond panicky. As a trader, you have to choose the correct strategy in the market to stay afloat. Many investors prefer to stay with safe currencies, including the dollar, to overcome the crisis. During such an unpredictable period, it is better to avoid risky options. You don’t need to risk your money in the market during uncertain times. It is essential to have a trading plan for all investors and specific entry and exit strategies. Besides, an investor should undergo fundamental, technical, and weekly analysis to determine the future course of action in the market. Based on the research, you can decide your strategy for the next week. A cautious approach is essential for an investor during a crisis like Covid.

Studying the Market

It is significant to update information regarding forex trading, especially during a crisis. Even a tiny amount of knowledge might help the investor act in the market accordingly. Following sound and reliable forex-related websites and financial publications would be better. There would be opinion pieces from forex experts on approaching the market and various trading strategies in magazines and websites. You can also join informative forex-related forums and read the discussions related to the experiences of forex traders. After analyzing all such options, you can decide on your investment on your previous experience in the market and by studying your trade journal. All investors need to maintain a trade journal to understand previous trading decisions. Based on such previous experience, a trader can proceed with his future investment strategies.

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