When Should You Leave The Forex Market Alone?

When Should You Leave The Forex Market Alone? - Trading Dispatch

If this week has taught me anything, it’s that you can never be too sure because you never know what’s coming or when it is coming. This past week we witnessed the US elections, and with that came volatility.

As traders, we love volatility. We love movement in a bearish or bullish direction. It doesn’t matter to us, as long as we see movement to capitalize on. However, sometimes traders can’t handle the volatility, and that is not because they are bad traders but rather because the Forex market is unpredictable.

The fundamental aspect of the market drove price movement this week. With Donald Trump and Joe Biden racing for the presidential seat, the markets fluctuated (for all USD pairs, Gold and Oil) when either party was in the lead. This was because the market sentiment for a democrat victory vs. a republican victory was totally different.

So what does a trader do in this situation?

Personally, I think beginner traders should remove themselves from the Financial Markets when there are major events like elections unless they have done adequate research and have the strong psychology required to place trades that follow their system.

The US Elections are an important event, especially the presidential election that occurs every four years.

Reasons to stay in the market during these events

  1. There is potential for gain. If you know what to expect or how to react when a certain party is elected.
  2. You learn how the markets move during high impact events and make mental notes of these movements. Thus you have experience when the next election comes around.

Reasons to stay out of the markets

  1. If you are not experienced, it is also good to stay away and preserve your capital.
  2. You can still learn why certain moves occur in the markets, but your money is not at risk. A good option might be to trade this event on a demo account. That way you will not incur actual losses, but still learn by trading the event. 

Summary

  • You have to decide for yourself what is best for you as a Forex trader.
  • Watch these events closely and learn what to expect from each outcome.
  • Always be prepared.

 

Side note – If you want to gain an understanding of fundamental events such as this, I suggest you watch Bloomberg or CNBC and soak up knowledge from economic experts.

Enjoy trading!

 

Risk disclosure – Trading CFD’s carries risk, losses can exceed deposits.

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