With Teresa May scheduled to make a speech in Florence on the 22nd September on Brexit prior to Brexit negotiations in Brussels and North Korea firing missiles, there is high uncertainty in the world economy. We asked Lee Sandford despite all this uncertainty, why now is the perfect time to be trading.
Lee, can you give insight into how the current economy will affect trading?
‘‘To make money as a trader, we need the markets (price) to move. As there is currently a high uncertainty in the world economy, we see an increase in volatility.”
What does this mean for traders?
‘‘When the markets are volatile, we see fast price movements which could make you money very quickly – if you know what you’re doing. The markets do not like uncertainty, so wild swings, for example, in currency pairs can provide the astute trader ample opportunity to make good returns very quickly. Politics and economic uncertainty can light up an otherwise sluggish currency pair but there is nothing like the potential of a nuclear war to put the fear in the money markets.”
How does the current North Korean situation affect us?
With the threat of North Korea potentially firing missiles over US Pacific territory, it creates fear amongst investing and this is when we see a move into safe havens, like Gold and Bonds. However, a trader who has a solid trading strategy can take advantage of what is happening in North Korea and trade these opportunities. You don’t have to be a city trader to take advantage of the volatility. Remember that as a trader, you can go short the markets and make money when the price goes down. For example, if you think the FTSE will go down in value then you can open a short trade.
How about the situation with Trump?
Is President Trump going to deliver what he promised? Tax reforms and building walls. If we start to see him disappoint, then that may not be good for the stock indices. As a trader, if we see this happen then we can look for shorting opportunities in the S&P500. Another option is to trade Gold to the long side. This could have a big impact on the Dollar so we could look for a long trade in the EURUSD, for example. While Trump is in power, I don’t think the markets will be settled so there will be many trading opportunities. On a day to day basis, you can’t guess where the market is going to go. However, if you have a good, solid trading strategy, you wait for the clear signal.
What about Interest Rates?
Interest rates rule the markets. Everyone is looking at when the next rate rise will be. Just look at what happened a few weeks ago when Canadian raised rates. The EURCAD dropped 200 pips instantly. A 200 pip move in 5 minutes is a trader’s dream… if you know how to trade it. Expectations of rates rise is another factor which makes now the perfect time to be a trader. If Economists are expecting a rate rise in December and it doesn’t happen, all hell could break loose. We will see this all in a chart. As a Technical Analyst, all this will be priced in our charts and we as traders can take advantage of this!
Let’s discuss Brexit. We have already seen wild swings in the Pound and the Euro. Let me tell you, this is only the beginning. We are going to see amazing opportunities for the next two years. What deal will be thrashed out? Will it be good for Britain’s economy? No one knows because we have never seen this before. It’s going to be a rollercoaster ride but for the astute trader is going to be an amazing ride fuelled by uncertainty and trade opportunities. For a well-trained trader, volatility is our food source. We want volatility and uncertainty so we can capture big trading profits. Let’s not kid ourselves in times like this, the uneducated trader will get hurt but the educated trader will thrive.
Do you have any advice for traders during these times?
During such unstable times, my advice to other traders would be to make sure you manage your risk and understand margins and stop orders. If you want more advice on how to maintain trading stability during such unstable times, read this article here.
Thanks for the insight, Lee. We will do our best to stick to our strategies, keep educating ourselves and enjoy the results!
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