This year has been one when electoral events have created plenty of uncertainty that could have had a significant impact on the value of currencies and, by extension, the Forex market. Some of these may have required significant shifts in trading strategies, while others could have required a rapid response.
However, the nature of these events is they can be prepared for. While there was nothing surprising about the Labour Party sweeping into power at the recent UK general election, nor any great fears of them doing something too radical once in power (with a new chancellor who was once a Bank of England economist), the same could not be said elsewhere.
Traders might have prepared for the Eurozone to take a hit had the National Rally won parliamentary elections in France, before a broad front stretching from the centre to the far left thwarted them in the second round of voting. While there was much relief among many in France and beyond, at least contingencies could be made for either outcome.
Tales Of The Unexpected
However, far more sudden and unexpected events can occur that challenge the markets in different ways. These will by nature be uncommon, but they can be very unexpected.
Good examples of this would include a sudden and unexpected financial crisis ranging from the run on the pound that forced the pound’s exit from the Exchange Rate Mechanism (ERM) in 1992 (which justified the high-risk Forex trading punt taken by George Soros), the credit crunch of August 20067 that started the global financial crisis, COVID-19 or 9/11.
The risk of major events coming out of the blue can truly shake a market. Even the suggestion of a major event can shake things; a good example of this might be the sabotage attempts against the French rail network on the eve of the Olympic Opening Ceremony as an example of how there are people out there planning to upend normality.
It is at times like this that every prop firm’s dashboard software will prove its worth. The best software will be something that enables a lot of information to be accessed very quickly, as in moments like this a great deal could be happening at pace. That means currencies could be nose-diving at any particular time – and not just one.
How Some Crises Hit One Currency And Others Hit Many
For example, while the ERM case in 1992 was specific to the pound and the US dollar took the biggest hit on 9/11 (as did the stock markets in general, with the added complication being that many New York offices had to close for days amid the devastation in their midst).
Similarly, a natural disaster specific to one country like the Japanese Earthquake of 2011 that produced a devastating tsunami and the Fukushima nuclear incident can overly impact one single country, whereas the Boxing Day tsunami of 2004 hit several different Asian countries around the shores of the Indian Ocean.
Covid-19 was another international example. Although not as sudden as an earthquake or a terrorist incident, it was an event that still transformed economic outlooks and drastically upended life for most of the world’s people within a matter of weeks. Equally, markets responded strongly when news of successful vaccine development came through.
While these developments will affect all sorts of markets – the Covid vaccine news boosted shares in pharmaceutical firms while depressing those of e-commerce companies and fast food delivery firms – the biggest impact will always be on currencies as economies benefit unevenly for various reasons, such as the Western nations who got the vaccines first.
How Different Trading Strategies Are Affected
The crucial thing to understand is that different traders will be affected in varying ways. Your prop firm may be working with some who are engaged in scalping instead of looking for the big wins, so their approach may require changing in a different way from those whose aim is always to look for the biggest potential gain of the day.
Not every trader will be looking to completely alter their strategy when big events are taking place; many will have shied away from trying anything like George Soros did in 1992 because of the risk level involved.
This means you will need your dashboard to be able to link up with different traders who may each respond to dramatic, game-changing events in varied ways.
Yet at the same time, as events and news move fast and new twists (such as how governments respond) can alter the picture at any moment, you also need to have all the information to hand as soon as possible, both about what is going on in the situation itself and how markets are responding.
