In times of crisis and instability in the financial markets, it is necessary to be careful not to break your account.
In this article, I will give you 5 essential tips for trading in these adverse conditions.
What are the 5 tips for times of crisis and instability in the financial markets?
1 – Watch the margin
When trading in markets with leverage such as Forex, you have to be careful with your trading margin. The lower the margin you use the more protected your account will be against the sudden movements of the market when it is against your trades.
2 – Tops and Bottoms
Many people use the tops and bottoms (maximum and minimum prices of assets over a given period of time) to serve as a basis for their trading.
The norm is that prices do not fall below such funds, or do not rise above such tops. However, in times of instability, fear and speculation cause many of the funds and tops to be broken, so managing your operations and Stop Losses based on them, ends up being a trap.
Assume that they can be broken and stay alert.
3 – Use the Trend
When there is instability, certain assets often enter a trend, even if there is not much logic in it.
The simplest way to negotiate is to take advantage of this price trend and follow these assets, operating only on the trend and not waiting for them to exhaust the force of the descent or rise, hoping they will make a retracement.
If in a normal situation this would happen, in abnormal situations you cannot count on a break in the trend.
4 – Technical Indicators
Technical indicators are a good help, and many traders use them to develop their trading strategies.
When the market is driven by fear or speculation, due to uncertainties, instability or economic crises, it is normal these indicators to mislead us.
Do not forget that all indicators move according to past movements, and in times of crisis, these movements become less predictable and less logical.
5 – Don’t leave open trades for the weekend
Moments of instability are conducive to creating GAPs and sudden moves in the markets, especially when they reopen.
For this reason, it is advisable not to leave trades open on the weekend, as there may be situations during the weekend that cause major differences in prices between the closing of the market on Friday and the reopening on Sunday night (Forex) or Monday ( Exchanges, Futures, etc.).
For security reasons, before markets close for the weekend, close all open trades, even those that are at a loss.
The reopening of the market is always unknown and it is better to be sure that you will not have huge losses at the time of opening than to expect a good gain.
A good solution in times of instability and crises in the financial markets is to trade in a type of instrument that protects you, such as Binary Options.
What are Binary Options?
Binary options are a financial instrument that allows traders to make predictions about the price of a given asset, without having to own any assets.
In binary bets or binary operations, as they are also known, we can sell or buy the option of an asset, but not the asset itself.
It can be a bet on international stocks, currency pairs, stock indices, commodities, etc.
We simply bet in 2 directions, up or down (above if we think the price goes up and below if we think the price goes down).
The great advantage of Binary Options at times of great volatility due to financial instability is that they are betting on rising or falling prices but with an expiration time that is short.
That is, you can place operations to finish within 1 minute or 1 hour, which protects us from the big moves that sometimes happen.
In addition, the loss value of each operation is just the value of our bet, so we know how much we can lose at most.
Also on the gain side, we know at the moment of placing the operation which it may be.
There are no surprises here.
As they are short operations, there is no risk of leaving operations open on the weekend, thus avoiding problems.
It is also a market where there is no leverage, as we know that leverage can work both for and against, and in times of great instability it tends to work against us.