Emergency and foreign currency trading strategies

Emergency and foreign currency trading strategies

In foreign exchange markets, exchange rate fluctuations are often caused by unexpected events. In this case, as the exchange rate increases, the profit opportunities also increase. Here, we will introduce the operation experience of some foreign currency traders to help you find the rule.

When an emergency occurs, the most important thing is to determine the impact of the incident on the exchange rates. For example, when the Soviet Union invaded Afghanistan, the two-Iraq war, and the Gulf War, the dollar exchange rate rose sharply due to its hedging effect. In the event, the loss of the dollar exchange rate became a natural event because of the occurrence of the event in the United States, which severely affected investors' confidence in investing in the U.S. market. Another example is that the U.S. military strikes on Afghanistan on Monday, and the dollar's exchange rate fell slightly. The main reason is that many investors believe that the war is extremely unpredictable, and bin Laden vowed that the United States will never be ready, in which case traders are in risk aversion considerations will once again favor ruilang and other currencies.

Second, it is also the most important aspect for the formulation of Transaction Strategies. It is necessary to determine whether the original trend of an emergency event on the exchange rate is positive reinforcement or negative reinforcement. For example, before the occurrence of the "" incident, the exchange rate of the US dollar fell into a medium-term trend due to the economic decline in the country. The explosion also played a negative effect on the US dollar, this accelerates the decline of the dollar exchange rate and expands the impact of emergencies. In this strengthening situation, we chose a homeopathic trading strategy to boldly short the dollar, with a relatively low risk and a high profit opportunity. The actual situation confirms this point. The exchange rate between the dollar and the Swiss franc fell from September 11 in 1.6900 to September 21 in 1.5680. The opposite example is that at the beginning of 2000, the yen continued to rise against the dollar. The Bank of Japan suddenly intervened in the market several times when the market was relatively calm and sold the yen, however, because the original trend of the yen is rising, the effect of sudden intervention is not obvious, and the exchange rate quickly returns to the original trend. This is the so-called negative reinforcement. Under such circumstances, emergencies often have a small impact on the exchange rate, and the period of fluctuation is also very short. Under normal conditions, common settlement users are facing a great risk due to slow information collection, therefore, it is best not to blindly change your original operation strategy.

In view of the current situation, the uncertainty of the war makes the dollar still facing pressure, especially the United States economy has not improved yet. Although the dollar against the yen has been under pressure in the near future, the Bank of Japan is reluctant to see a strong yen and is ready to intervene in the market at any time. Therefore, it is highly risky to hold the yen, we recommend that you be vigilant when you increase the number of yen. Although the euro zone and the Swiss economy are not optimistic, the risk of holding the euro and the Swiss franc is slightly lower in the current situation. If the European Central Bank can cut interest rates again on Thursday, the euro-dollar exchange rate is still very broad.