Online Forex trading is affected by many world events. Knowing the effect they will have on the currency exchange market will grant you the upper hand when deciding your trading strategies.
You could compare trading with a crazy race in which you have to always keep ahead of the rest of the runners, no matter the direction they run. Now, what would happen if you were in first place, but the people behind you suddenly change direction? You would have to assess in which direction they were running to try to become first again. But—to make it more complicated—what would happen if the people suddenly stopped running? It would be impossible to win anything, would it not?
In trading you need to make the most of market movements, but certain news can make the markets freeze. That means that, if movement is scarce, you can not use your tools to be “ahead of the market”. Only when the market moves again, you can find your way up.
The advantage of online forex trading is that regardless what a currency does—affected by world events—you can still make profit if you open the right positions through the platform you use.
Let’s see two events as examples:
The Brexit Announcement And Online Forex Trading
On Thursday June 23, 2016, while half the world was occupied with mundane activities, many traders were paying close attention to what was happening in the United Kingdom: The Referendum.
For months they had been talking about whether or not to leave the European Union. But even before the referendum took place, the market was already affected by it. For example, if we have a look at the polls since September 2015 we see that 46% preferred to stay in the EU. However, the pound plummeted when a telephone survey—which in the past seemed to prefer the Remain option—indicated that Leave would be the choice of most UK voters.
Finally the vote took place and Brexit was the choice. How did this affect online forex trading?
While many where oblivious to this event, many made money online by opening the right positions at the right time. That night, some made up to £20,000.
Jackson Hole FED Meeting
For more than 30 years, this annual economic symposium has been held at Jackson Hole, Wyoming. Investors from all around the world try to wait and see what central banks will do and try to analyse what the effect of the symposium will be on the economy.
This year again, markets were just waiting for the FED’s chair speech with expectation to see what the outcome of the meeting would be. Again, nobody moved, all waited. What has been the effect?
It seems that rather than an immediate rise of interest rates in the US, the focus is on a long-term strategy.
In conclusion, some world events can have an instantaneous effect on the market, in which case you have to swiftly adapt to it, while others can create expectation and freeze the markets, with the consequential feeling of uncertainty for all investors and traders.
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