When getting started in the world of Forex trading, gaining an all-important market edge is pivotal to becoming profitable! Edge can be defined as any advantage traders can gain over the market to make gains.
There are certain ways to enter a market and gain exposure to potential price movements. Certain strategies are easier to implement than others. Traders must identify what type of traders they are to truly realise edge and earning potential. Traders should choose a strategy which is conducive to their personality as well as current market movements and sentiment.
Uncertain times plague global markets at the moment as concerns grow over a second wave of the deadly coronavirus as well as civil unrest in towns and cities across the US and Europe. The market collapse which started on Monday 9th March as the true scale of the deadly flu strain triggering a bearish market.
Thursday, March 12th witnessed one of the worst single-day market downturn in history with the Dow Jones Index falling by 410 points or 23% for 2020. Billions of dollars was wiped across markets globally which capped off a brutal first quarter of 2020.
Trading the news
Ever since March, the public has been glued to their TV screens eagerly awaiting news of when normality will return as the public long for times of the past.
The news has arguably provided insight for eagle-eyed traders to capitalise on. When markets bottomed in March, this provided a wealth of opportunity for CFD traders to open buy positions low and watch asset classes recover.
With stimulus packages rolled out in the US, this gave the economy a much-needed cash injection as unemployment rates in the leisure and hospitality industry suffered 39.3%. In May unemployment was at 13.3% compared to a consistent average of around 3.5% since April 2019.
With statistics and updates like this always on our screens, many viewers are unwittingly receiving information on opportunities to open positions. For example, airline stocks suffered massively but this can not last forever as global travel is set to resume. By trading CFD’s you do not have to buy stocks but speculate on their performance.
The news has been crammed with stories of social rules and travel restrictions which heavily suggested that technology could be a big hit as people look for entertainment at home. Shrewd traders would have opened positions on stocks such as Netflix at £291 in mid-March which is trading today at £465. By using the leverage setting of 1:20 the ROI based on 2 LOTS would see an attractive profit of £2,792.
In volatile markets arguably the best strategy would be scalp trading. This method is, in essence, opening a buy or sell position and closing out the trade quickly or when the market moves suddenly aiming to ‘scalp’ a quick profit.
Cryptocurrencies are particularly good to ‘scalp’ as there is lots of price movement within the volatile asset class as well as the market being open 24/7.
Forex pairs are ideal to ‘scalp’ in the first hour of market open as there is no news yet released which can affect a currency pair. This means that market movements are based solely on price action.
By trading CFDs with leverage, traders can truly maximise their earning potential. Combining scalping with leverage can be a potent mix of a traders journey towards trading success. Stay up to date with global news to keep yourself in the know and ahead of the curve!
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