COVID-19 has been taking the world by storm the past couple of months. Although many countries claim to have it under control, for now, many others are still struggling.
We all know more or less the many challenges countries have been facing, and the stock market hasn’t been all rainbows and unicorns lately, either. This article aims to help you trade in the best way possible through such difficult times.
This pandemic came at a time when the global economy was already facing tough times.
And, yes, it’s true, investors fear the spread of the coronavirus will deeply affect economic growth, and that government action may not be enough to stop the decline.
However, central banks in many countries responded to these claims and slashed interest rates.
In theory, at least, this means that borrowing will be cheaper and will encourage spending to boost the economy. Also, let’s not forget that global markets recovered some ground in late March after the US Senate passed a $2 trillion (£1.7tn) coronavirus aid bill to help workers and businesses.
Additionally, although it commonly said that the coronavirus had plunged the world into a “crisis like no other”, it does expect global growth to rise to 5.8% next year if the pandemic fades in the second half of 2020, according to the IMF.
So, all in all, with the current state of things, there is light at the end of the tunnel.
All you need to do as a trader is:
1. Don’t Panic
On the one hand, it is understandable that you are more likely to panic when your investments drop and quickly sell out your assets. But this is not the best way to react when the markets go down.
If you give in to your stressed, panicky self, you will end up “emotional trading“.
When a trader or investor lets personal feelings and emotions impact their decision-making. Most traders would agree that having control of your feelings is one of the most critical traits in the investment world.
So, basically: panic will affect your thinking, your unclear thinking will make you cause mistakes, and these mistakes could eventually lead to losses. Therefore, concentration and focus are key.
As challenging as it sounds, try your best to focus on your existing long-term goals at this time and avoid investing decisions based on fear.
More importantly, panicking pressures you to overlook bearish opportunities when the market recovers. Staying on track helps investors in times of turmoil!
2. Trade During the Pandemic – Think Ahead
During turmoil times, both bad and good stocks are bearish. In time, however, the good stocks will eventually become bullish, while the bad stocks will remain down.
For beginners, forex might seem very unpredictable and confusing. Being said that, we highly recommend that you don’t just “jump into” the stock market and hope for the best.
At EverFX, we offer our clients a massive selection of informative content regarding trading and where to start.
More experienced traders believe that the best time to buy a stock is when a good company’s stock goes down in price. And make it a big opportunity, which means that the market volatility gives the best chance to find good stocks to buy for a potential profit upon market recovery.
Therefore, since these low prices won’t last forever, it means that they will probably, eventually rise.
Your broker can also advise you on your next moves, but it’s good to have an idea of how things work.
3. Don’t Start Reviewing your Funds on Repeat
Most of your equity funds, for instance, might seem like a horrible choice, whereas the gold fund will look like the best decision ever. You may get tempted to pull out of equity funds and redirect the money into gold or stay in cash.
Any review you undertake at this stage should be purely from an asset allocation perspective. If the asset mix has changed substantially from desired levels, rebalance the portfolio to its original shape.
Try to pick your assets wisely and keep a balanced investment portfolio. By having the correct proportion of diversified assets, you manage to keep your portfolio’s volatility under control.
4. Understand The Risks Involved
As mentioned previously in our article titled “How To Start Trading In 7 Simple Steps“, losing money is never fun. It’s easy to panic and pulls out at the wrong time. Simultaneously, it’s as easy to get swept up in the excitement of what feels like a winning stock.
Through trading, yes, you can make money. You can, however, also lose money. So, it all comes down to dedication, knowledge, strategy, and of course, a trustworthy broker. Just like Yvan Byeajee stated: “Confidence is not “I will profit on this trade. Confidence is “I will be fine if I don’t profit from this trade.”
Risk tolerance is how much of a loss you’re prepared to handle within your portfolio. Ultimately, you should have a sound strategy in place to hedge against your losses.
You must analyze the market to make the right decisions in the future using your experience of making successful trades, and, of course, to avoid repeating the same mistakes which previously led to losses.
5. Patience and Smart Decisions
Last but not least, keep calm and be patient! The market will take some time to recover, yes, but this is not something you can control.
Take it one day at a time, learn as much as you can (EverFX has all the educational material a trader needs), and quoting Yyvan Byeajee once again. “Don’t ever make the mistake of believing that market success has to come to you fast. Trade small, stay in the game, persist, and eventually, you’ll reach a satisfying level of proficiency.”
Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.
Risk Warning: Our products are traded on margin and carry a high level of risk and it is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved.