Trading Exchange Amidst the COVID-19 Pandemic
Also known as SARS-CoV-2, the new coronavirus, whose first eruption can be traced to China’s city of Wuhan in Hubei province, seems to have unleashed chaos and panic around the globe, left right and center. Apart from being a global pandemic and a health crisis in various parts of the world, the COVID-19 pandemic has affected our lives in so many ways. Needless to mention, the economy has been hit hard, with trade being among the most affected sectors of economies.
Especially in the worst-hit areas where hundreds, if not thousands of new cases (and deaths) are reported almost every single day, lockdowns are being implemented, businesses are shutting down, major companies are executing layoffs, and investors are in panic mode, with some of them withdrawing funds or pulling out of major projects. In major stock exchanges, some of the best-performing stocks have been on the decline since the WHO’s declaration of COVID-19 as a global pandemic. The currency market is also volatile, now more than ever. Below, we look at some highlights on how the coronavirus crisis has affected various markets and a few tips traders could use during these difficult COVID-19 Pandemic times.
The Forex Market:
The first few weeks and months of 2020 saw a tremendous increase in volatility as far as the currency exchange market is concerned. This is mainly because as we go deeper into the pandemic, the crisis fueled chaos and panic all across the planet. While many currencies plunged into a decline, some of the major ones managed to hold a strong footing still. For instance, the dollar managed to remain strong against many other currencies around the globe; it was probably the biggest winner. Other currencies that managed to stay strong include the Swiss Franc and Japanese Yen.
Seeing this trend, some forex traders who were keen enough to notice this rushed for the dollar, upon speculation that it would continue to improve against most other major currencies. The GBP also managed to stay in the race towards the end of the first quarter of 2020 but with extreme volatility. Considering the frequent ups and downs in the past weeks, it’s wise to use this site to determine and keep track of exchange rates so you can make the right investment decisions in the Forex market. It helps you determine which currencies the GBP is performing better against, while also giving you insights on what the future is likely to hold.
The Stock Market:
The stock market is probably the worst-hit market as far as exchange trade is concerned. As soon as the coronavirus outbreak was declared as a pandemic, many traders started panic-selling their stocks and shares out of fear and uncertainty. Consequently, the increased supply led to a decline in the value of stocks of most companies around the globe. This was made even worse by the layoffs and shutdowns of many companies as the COVID-19 epidemics continued to increase in many countries and nations of the world. In the US, particularly, the stock markets experienced a major plunge on Wednesday 11th March 2020 as soon as the crisis was officially declared an epidemic by the WHO. With the immensely increased volatility in the stock market, it’s only advisable to tread carefully and trade wisely, which brings us to the next important point… trading tips amid COVID-19.
Helpful Tips For Stocks Traders in COVID-19 Crisis
- Employ risk management tactics:
This involves employing tactics to identify potential risks and taking measures to mitigate them so you can avoid losses. Risk management is more vital in the current times where stock markets are more volatile.
- Minimize the use of leverage:
Leverage can be a great way to maximize returns during a trade. However, higher leverage could also lead to higher losses. In these uncertain times, it’s only wise to use leverage sparingly or only when you’re almost sure that stock prices will appreciate.
- Position sizing:
How much money do you stand to lose from a trade, and how much do you stand to gain from it? Proper position sizing can be a great strategy to minimize losses or maximize returns. Especially in these difficult times, it’s best to ensure that for each trade, you risk a maximum 3% loss of what’s in your account.
- Keep track of open positions:
Towards the end of April, companies will start releasing their quarterly results, and this might be a game-changer even amidst the current global health crisis. To stay ahead and react to new changes faster, it’s best to monitor trades and keep track of open positions.
Finally, the best thing you can do as a trader in these difficult times is to stay sanitized, observe social distancing, stay safe, and stay at home as much as you can. The novel coronavirus is still something even the world’s most renowned experts know very little about, even though some of them are spending sleepless nights trying to develop a complete cure and a vaccine. All the same, you’re better off with the information above as far as trading and COVID-19 are concerned.
