How the foreign exchange will weather the tide of european uncertainty


The Forex market tends to be rather synonymous with a modicum of uncertainty. This is one of the reasons why it is the most liquid financial sector.

Traders have become somewhat normalised to the ups and downs associated with regular movements. It is nonetheless an undeniable fact that we have entered into new territory in terms of the Brexit and even the future solvency of the European Union as a whole. How will the Forex sector supersede this volatility and why should you do the same?

Macroeconomics as Opposed to Microeconomics

One of the fundamental principles which will be embraced by the markets is the ability to look at the bigger picture as opposed to a small slice of a decidedly large pie. This is when the theory of macroeconomics comes into play. Traders will take a step back from the charts and observe historical trends; ideal when hoping to form a broader interpretation of the markets as a whole. This will also help to stave off any uninformed actions that might otherwise occur.

Profiting CFD Trades

Contracts for difference are often turned to when the markets begin to take on an unpredictable and unsavoury flavour. This primarily arises from the fact that profits can be realised even when prices are falling. Sales can take place quickly and thanks to the flexibility of these positions, execution times will often range from days to hours and even minutes on occasion. This is not to mention the fact that CFDs can be traded on margin (by those who are experienced and not averse to higher levels of risk). Tax obligations are a final benefit to mention. As there is no stamp duty, the advantages of trading CFDs are obvious.

Stemming the Flow of Financial Blood

The Forex markets have always relied heavily upon their innate sense of liquidity. There are certain times when this liquidity may appear to “dry up”; much like when the tide recedes immediately before a tsunami approaches. Why is this the case? The most logical answer is that traders (and the market as a whole) is waiting for some pivotal news or financial data to be released before bulk trading will resume. Contemporary examples could include clarity in regards to the Brexit or the possibility of future interest rate rises from the ECB.

Lower trading volumes are completely natural and they are excellent ways to avoid absorbing otherwise unexpected losses within a short period of time. Let us also not forget that this market is open 24 hours a day and seven days a week. If the European Forex markets are slightly less liquid, it is a good bet that Asia will soon see a surge in trading.

Although we might very well be entering into a new paradigm in terms of European-related market uncertainty, the Forex markets can and will overcome these turbulent times. Individual traders should keep the perspectives mentioned above in mind, as such strategies are extremely useful when the “going gets tough”. Either way, these levels of present volatility should evolve into regional stability over time.