There are many times when money markets and stock markets are rocked by sudden, unexpected events. There can be natural disasters, wars, major terrorist incidents like 9/11 and, of course, moments of great political change and uncertainty. All this can lead to significant slippage as well as new possibilities.
In these situations, money markets can be volatile. Opportunities can arise and vanish quickly. Therefore, it is important to be well supported by prop firm tech to handle data fast and respond to events swiftly.
Why 2024 Is A Year Of Political Uncertainty
When it comes to politics, 2024 promises to be a dramatic year, with the majority of the world’s electorates involved. While we can discount the exercise in Kremlin kleptocracy that maintained Vladimir Putin’s grip on Russia, other elections have rather less certain outcomes and consequences.
Among these are the elections currently taking place in India (where polling takes place in different locations in turn over several weeks before the final count), South Africa and, shortly, the UK, while the world will be watching the United States come November.
These could all bring their own uncertainties. As it stands, India is expected to return another majority for the BJP, which analysts would regard positively as it maintains political certainty. A return to the hung parliaments of the 1990s and 2000s, or an opposition coalition, could create a lot more uncertainty on the markets and put downward pressure on the Rupee.
Here in the UK, polls suggest a change of government is probable. In the last two elections, Labour’s radical policy programme under Jeremy Corbyn led to shadow chancellor John McDonnell admitting that the party had planned for a run on the pound in the event of victory. A Labour win this time is less likely to bring such turbulence.
Uncertainty From Cape Town To Washington
Instead, it is in places like South Africa – where the ANC looks set to fall short of a majority for the first time after 30 years in power – that great uncertainty will arise.
While the end of single-party dominance will be welcomed by many, it does pose a lot of questions about the value of the Rand over what economic direction the country goes under a coalition government. The Democratic Alliance offers a more liberal economic approach, for example, while the Economic Freedom Fighters is essentially Marxist.
Perhaps the greatest uncertainty is to be found in the United States, where the already febrile and polarised atmosphere may only be heightened in the wake of Donald Trump’s multiple convictions. After the violence that occurred in the wake of the disputed 2020 Presidential Election, few would bet on there being no repeat.
In addition, were Mr Trump to receive a jail sentence but still somehow win (incarceration will not bar him from standing), one of the world’s most stable and established democracies could face its biggest crisis since the Civil War. This could shake the dollar, the world’s reserve currency.
These are just some of the types of situations that could cause a lot of uncertainty and whether they happen or not, traders need to be prepared for the opportunities and threats that may arise.
Events, Dear Boy, Events
Understanding risk is, of course, a key part of Forex trading. For a prop firm managing a large number of traders, having a system that enables you to stay on top of what each of them is doing may be very useful, as you might spot a situation in which some traders are taking excessive risks or failing to change their approach despite receiving new data.
At the same time, you may need your tech to be extensive enough and sufficiently multifaceted to deal with some very different kinds of trades going on at the same time.
For instance, while some traders take advantage of events that can bring major changes in currency pair transactions, others will still be looking to make the numerous marginal gains involved in scalping. And while some may suddenly need a stop-loss facility in place before they bleed money, others will need to drive home a sudden opportunity.
In one sense, political uncertainty is not as bad as some other events. An election may spring a surprise result, but at least everyone knows when it is and can prepare for different scenarios. This is very different from events that come out of the blue like a natural disaster or a 9/11 situation.
As Harold MacMillan, Britain’s prime minister from 1957-63, allegedly once said, “Events, dear boy” were what shaped the fortunes of governments the most. You need to ensure your prop firm is geared up to respond to them.
