i’m rather new to forex trading and haven’t witnessed what happens during times of conflict. Given the steep drop in USD on the announcement of Syria bombing last week (albeit short lived) i’m curious to hear what typically happens during times of conflict/aggression. For example if the Syria or North Korea scenario evolve into something much larger could we be expecting big time USD depreciation.
I guess i could pull up charts for times in the past, but at work right now and don’t have access.
Can I ask, are you a long term trader or a short term trader.
This may seem like a silly question at first, however if you are a ‘day trader’, or rather a trader who holds positions for less than perhaps 48 hours then the above question wont really effect you, or rather your trading approach to be more specific.
Even in the most bullish markets there are pullbacks, and in the most bearish markets there are pullbacks. In hindsight, and depending on your own trading style, either the main trend or the pull backs could be traded. You mentioned that you are interested in USD; [as proof of my above comment you can look at the six months from the starting date of 01/08/2008 - the latest financial crash. Considered as the most severe bearish market conditions in the last 10 years. However, as obvious as the bearish conditions are, there were still opportunities to buy USD pairs on pullbacks when trading short term]
The point that I’m trying to get towards [all be it a very simplified description] is that long term economic views, such as a war or political disagreement still allow you to either trade with the trend or against it when trading on shorter time frames.
Now, should you be the type of trader who will be holding open positions for a number of days or weeks; your question becomes very [B][U]very[/U][/B] relevant towards your own success as you are in essence trading the economics which drive the longer term trend of the markets.
This is of course just a basic insight, and some traders will argue that trading with the longer term trend is the only way to go, however, I’m inclined to disagree depending on how risk adverse you are as an individual.
i’m short term, less than a minute to several hours at most but i’m always aware of the underlying longer term trend.
The reason that i ask is that when Trump announced bombing Syria last week USDJPY dropped like a rock…now I’m noticing USD weakness on reports of potential conflict. However, if US were to go into extended battle with another nation, i can’t imagine USD would drop forever…just wondering what has been other peoples experience in the past trading during times of conflict
I see where you are coming from; however unexpected ‘flash’ news like this will catch out even the most experienced fundamental analyst - regardless of if they use Technical Analysis or not. A surprise missile strike in Syria or an unexpected snap UK election will cause short term market mayhem which is out of the scope of both Technical and Fundamental Analysis - these rare times are the only times that we traders have to take the good with the bad. It’s all part of the risk of trading.
When a market is in ‘free fall’ and you’re on the other side you have to take the loss at the best price available - which in many instances can be much much worse than your initial Stop Loss level. Nobody can avoid this, and there is not a single way to limit these black swan events.