Central Banks Create Uncertainty For Traders

The holidays and the Chinese New Year are now behind us, and as celebrations come to a close, it’s time for serious traders to begin reanalyzing methods for making money in a very volatile market. Sure, many of the markets throughout the world, including the New York Stock Exchange, are at unprecedented levels but despite the stock market rallies, there is still incredible uncertainty in currency markets throughout the world. Just as the markets seem to calm down and it appears to be a great time to cash in on the improving conditions of worldwide economies and currencies, Ben Bernanke throws the world a curveball with a speech stating that there are still headwinds to be experienced. It’s not just the U.S. Federal Reserve Chairman that causes investors to pause and reconsider strategies-the ECB, RBA, BOJ and BOE have all made comments at recent monetary policy meetings that have led investors to remain cautious. In fact, many comments by the leaders of central banks throughout the world give the indication that the volatility of the markets is in no way over. Comments have led many investors to believe that not only is volatility the name of the game, but there are also very difficult times ahead. With all of this uncertainty that seems to hinge directly on a few comments made by central bankers every few weeks, as an investor you may be asking yourself what this means for your bottom line. The key to making money in this unique market is to remember a few key points. Remain Flexible in the Short Term This is not a time that investors should hold onto investments. With all of the uncertainty that’s occurring, it’s not wise for investors to become too energized by any one particular trade trend. Instead, flexibility is vital to thrive during uncertainty. You should allow yourself the flexibility to close out trades based on key events, in order to build on capital. Don’t Simply Rely on Correlations for Trading Opportunities At the start of this year, traders and investors witnessed the breakdown of correlations of the majors, which can be a disastrous situation for traders who rely on correlations to make decisions. Since major worldwide economies are all at a different place right now, the correlations are completely broken down. For example, the Australian economy is entering a period of difficulty, whereas the U.S. economy is beginning to experience a slow recovery. Be Prepared for the Impact of Economic Releases In this market, it seems that every bit of economic data released has a major impact on the markets. Even with the release of the most minimal piece of economic data, traders see big jumps in stocks. To address this, it’s important to analyze technical charts for key trendline supports and resistance levels. Having solid entry levels in place is a good start to the process of preparing order placement. Utilizing the services of a sophisticated trade manager is a great resource in order placement strategy. This is also a good way to remove the sense of emotion that can influence trades surrounding the release of economic data. Trading in difficult markets can be a profitable venture, with a little understanding of what you’re doing and some strategic planning on the part of the investor.