Although we are only a mere two months into 2017, this year has already proven to be a game changer in regards to economics, politics and international relations. The Forex industry represents the largest marketplace in the world, so it only makes sense that it will reflect this very same sense of change. This has left many investors scratching their heads. What are the best strategies to embrace during the coming months? Are there any tactics which should be avoided? Which methods can be the most successful when long-term growth is required? While nothing is set in stone, it is still a good idea to take a look at some efficient ways to approach such a liquid marketplace.
The Trump Factor
The fact that Donald Trump is now president has come as a shock to many. Whether we like it or not, he will likely be around for the next four years. This might not necessarily bode well for some Forex investors, as he is already associated with a significant amount of uncertainty. A disturbing example occurred in late January when he claimed that the dollar was “too strong”. This naturally sent the value plummeting until the Treasury Secretary allayed fears by stating that the strength of the greenback was essential for domestic growth.
The main issue here is that no one seems quite certain what this “Commander in Tweet” may actually say next. This has many investors sitting on the fence and large trades are likely to be replaced by short-term positions. For the time being, such an approach could be wise until the finer details of his presidency are formally ironed out.
The other major factor which is sure to dominate currency trading news is the ongoing Brexit issue. There has been a great deal of speculation surrounding the projected long-term values of the British pound and this seems set to continue. Recent news reports suggest that (to the chagrin of many investors) the remainder of the year will be spent discussing the exit bill of €60 billion euros as well as the future rights of expatriates. However, there is not much substance in regards to the mechanics themselves and this has rightfully caused some investors to worry. This is another reason why the bears are likely to dominate Forex trading during the next fiscal year. Such a conservative stance could be an excellent way to hedge against additional risks and volatility.
Tactics to Avoid
The fluid nature of the Forex markets can represent both a benefit and a potential drawback. This primarily depends upon how much a specific investor wishes to speculate. One issue to take into account is that the current marketplace is not necessarily conducive to such an approach; there are simply too many unknowns to account for. Even the most seasoned traders are scratching their heads and experts will fully admit that such levels of volatility are not expected to disappear any time soon. It is therefore a good idea to adopt a conservative outlook until more stability is seen across the boards.
It is also critical to stay away from knee-jerk reactions caused by sudden political shifts. The aforementioned comments from Trump are a perfect example here. Simply stating that the dollar was “too strong” immediately sent values into a tailspin as investors desperately tried to offload their holdings. The fact of the matter is that this was caused by fear alone. In other words, try to avoid speculation and to stick to the fundamentals as opposed to making any unwise snap decisions based upon emotion.
Leverage Technology in 2017
The recommendations above clearly illustrate the fact that modern Forex platforms are essential in order to keep up to date with any late-breaking news. This is one of the many reasons why a growing number of traders are utilizing the tools provided by CMC Markets. Lightning-fast response times, a mobile-responsive design, intuitive trading instruments and live news feeds are some illustrations of what can be offered. There is still no doubt that 2017 is set to be a landmark year in terms of trading and politics in general.