Forex trading during a financial crisis and instability

Forex trading during a financial crisis and instabilityFinancial crisis and instability ahead ?

 

Question

I have been reading very disturbing reports from RESPECTED and serious financial experts and some politicians, about a very serious market crash, some say will begin in some form around Sep 23-28 and deepen into 2016. Indeed the respected financial and KEY advisor to Gordon Brown’s Labour govt Mr Damian MacBride, publicly stated during the China crash a week ago, that everyone should withdraw as much money as possible from the bank and to stock up on tinned food! He also said that the coming crash will be 20 times worse than the 2008 crash. He was very serious and since then there is a media blackout as other events grab the news.

Many economists in USA are saying similar adding that the dollar is about to tank and a new world currency to be eventually formed. Some mention SDR’s will be the new world currency. Many are advising owning physical gold/silver. I dont know if these reports  are worrying to Expert4X but they certainly worry me, in CASE they became true. I am just about to start trading with real money in a few weeks so its especially urgent for me to know more.

I have several questions for Expert4X as follows:

– the stock markets would tank but what effects would this have on the currency/commodities markets?

– which currencies would be the winners/losers?

– can Expert4X imagine a scenario described above?

– What advice can you give or indeed ant of our members?

best regards

MK

Response

The Financial Crisis and instability you are describing is a great opportunity for Forex traders for the following reasons:

  1. Increased Volatility. Many Forex trading systems need volatility to work. It is likely to volatility would increase considerably leading to more trading opportunities.
  2. Longer term trends: Certain currencies will be impacted more than others. Which ones will have to be determined closer to the time and on an ongoing basis. In the end this could results in trends where some currencies weaken a lot more than others. Trading with the trend in this scenario will be like printing money
  3. Selling is normal in the Forex market. No matter which direction the currency price is moving it is a trading opportunity. That is unlike the stock market where there have to be buyers for you to be able to sell.
  4. Many brokers offer currency alternatives such as Gold and financial indexes it the advantage of liquidity. So you don’t need to own Gold to trade gold.

Nothing is more frustration than a dull, direction-less and lacklustre market and what you are describing is the opposite.

So I would suggest that you develop your technical analysis and fundamental analysis MANUAL Forex trading skills and trade the market as regularly as possible. Get your mind, commonsense and intellect involved in trading – not like many traders who strive for mindless automated systems. Scalp for a few hours a day and swing trade at the same time. Tune into what is going on and pay attention to the relative strength of currencies. Try to find reasons why things happen is the market. Why is the AUD trending downwards? Why did that turning point develop ? You will be amazed how quickly you can tune into the market and understand what is going on within 2 weeks of going that. If you develop and intimacy with the market you will profit tremendously from market instability and volatility in the future as identifying trading opportunities using fundamental and technical factors will be second nature.

Please add your view below

 

 

8 Comments

  • fixer

    September 5, 2015

    very good answer Alex.Just an addition: risk (trade size) management is also important. It’s not about being right or wrong its about surviving if the market does something unexpected and thriving when market behaviour gives you the opportunity.

    • Alex du Plooy

      September 5, 2015

      Good observation – Forex trading has many aspects that have to mastered by personal experience over time. Areas such a currency selection, lot sizing, risk control, entry management, exit management, timing can best be learnt from personal experience.

  • Rod

    September 6, 2015

    The big question for Forex traders is what will happen to Brokers if there is a big crash in the financial markets. We have seen a few brokers go to the wall in the big crash of CHF just recently. Many other brokers were close to falling as well. How safe is our money??? Whatever country you live in should be were you have your brokerage account. If you have an account in a foreign country and things go wrong in the financial markets, you could have a lot of trouble getting access to your account. Europe is a case in point. Keep the minimum amount in your account and top up if necessary (draw down) then withdraw when you recover. I live in Australia and there is no way I will have any accounts anymore with brokers in other countries. For a start they charge excessively for withdrawl’s,contact is unreliable and and the exchange rate risk is way to high.

    • Alex du Plooy

      September 7, 2015

      I know a few Australians that made a 50% profit from the Alpari UK collapse when their accounts were refunded due to the weakening AUD. Life in general is becoming risky – where do you put your money?

  • Mike K

    September 6, 2015

    The BRICS countries: Brazil, Russia, India, China and South Africa, are also in trouble with falling oil and commodity prices and bubble economies in some cases…There seems to be a crash coming (beginning Sept 23 this year and continuing through 2016?) but what commodities/stocks or currency pairs would surge in event of a massive financial crash? One would assume Gold and Silver but what else? There will be many losers but some winners…

    I am also concerned with a possible run on banks resulting in capital controls such as a govt/EU directed bank ‘holiday’ (ie. theft) as recently happened in Cyprus, or theft of pensions, restrictions on capital outflow and much more besides. How would this affect currency trading in the aftermath of a huge crash, would trading be suspended? would our accounts be frozen? or Brokers operations (and their cash holdings) impacted? Do any of Expert4X members have any opinions, advice on what action to take if any? If it happens we will ALL be affected.

    In any case, it seems owning physical Gold (or Silver) cant be a bad thing although Govts. have at various times in history imposed controls on physical ownership.

    However, it would be nice, if we could get more informed as a trading group of how it might play out in order to react in the smartest way when it hits…

    Of course, it all sounds a bit like the Year 2000 problem but is it different this time?
    Mike K

  • Taufiq

    September 7, 2015

    Humble ‘n Simple Contingency Plan

    On every trade we should put an opposite pending order 200p away from the current position with open target and small stop loss. Do not set it too close to the open trade so it wouldn’t be skipped off by a sudden move.

    The size is up to you but make it at least twice as big as the existing orders. Additionally, put a trailing stop starting with 100p or so.

    Do that from now on until the expected D-Day is over. If you don’t know when it’s over, just make the above practice as a habit.

    Good luck.

    • Alex du Plooy

      September 7, 2015

      Good idea – That would hedge again sudden moves – Most currencies weaken so slowly that you don’t know that it is happening until you look at the chart 2 months later

  • Mike Kitching

    September 8, 2015

    I’m not sure what the trigger will be (if one is needed) but whatever happens, it seems likely that Greece will default and possibly drag down Italy/Spain/Portugal (France?) maybe the entire Eurozone and trigger an Euro/EU meltdown and social unrest. This is without a collapse of the Chinese economy, collapse in oil or crash of US dollar/Rouble/Yen etc. Please note that all of this may not happen this year; many ‘experts’ are warning that the coming Sep/Oct crash only sets up the big Kahuna until 2016…
    The nightmare situation that could well happen (even be engineered) would be a SUDDEN event…you wake up one Monday morning to the news that banks have shut down, your accounts and broker deposits/profits are frozen, supermarkets and gas stations closed. However, I believe a series of ‘events’ that will lead up to worst-case scenario will give some warning to those astute enough to realise what will come next. I am trying to figure out what those warning signs might be. The problem is there are so many ‘talking heads’ out there who give contradictory advice.
    However, physical ownership of Gold/Silver seems like the obvious ray of light – for a while – but I think it too will end up in bubble territory perhaps even being displaced by something like Bitcoin….China is biggest producer/buyer of Gold on the planet and has accumulated vast Gold reserves (some say 10,000 tons!) This could be used as a WEAPON against USA/Rest of world to reset the world’s currencies and unhinge the Petro-Dollar…and more. Do the Chinese want world domination? Who knows? But I don’t think the USA/Western world will allow this anyway, hence they may use a Bitcoin lookalike to bring down the whole house of Gold that Russia/China are relying on … Where does all this leave the poor befuddled Forex trader? This is only one scenario of many that could happen.
    I am going to DAY trade but with the following precautions:
    – Put pending orders in opposite direction to my trade (thanks Taufiq).
    – I will NOT use EAs/robots as huge price spikes could wipe out your account (it is possible to use ‘spike protection’ indicators) check out the ‘TraderAgent’ indicator: http://www.icefx.eu/newsinfo/
    – Each week I will transfer some of my profits (50%-75%) from my broker to my bank and some of this will be taken out of my bank….This is the where we step into the unknown…Yes its a risk but where else could we safely trust our money? Do not trust ‘safety’ deposit boxes in banks! Of course you can also leave it in your bank and wait for the bank bail-in…..
    I think that owning physical gold and having large cash reserves will give you a big advantage. However, all Govts will try to steal your money especially if they KNOW you have left a paper trail leading to your Gold purchases. I am also assuming a large % of my money to be stolen by Govt but a significant part of it will not (I hope). Another strategy is owning land/property.
    As a hedge, I am thinking of buying thin wafers of Gold in 1-5 gram amounts. They are credit-card sized and vary in price from around 50-150 Euros. They have permanent, indestructible holograms of the certificate on one side and of course the impressed Gold stamp. This would enable the wafers to be used as ‘money’ and being of fairly small size (from 50 Euro) they would not be a hindrance as say a heavy bar of gold worth thousands would be when it comes to bartering/local exchange…The link is here: https://www.karatbars.com/index.php?page=main
    I don’t think there are reporting requirements for the purchases and they deliver direct to your door with utmost discretion (they say).
    Of course, none of the above may happen but if it does then I like to think we could stay ahead of the game by making some simple changes to our way of trading and take a few sensible precautions on how we use and store our money….

    Regards
    Mike K

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