The Economic Fallout as a Result of Global Political Events: How to Survive as an Options Trader
“In investing, what is comfortable is rarely profitable.” – Robert Arnott
2016 was a tumultuous year for the global geopolitical and socio-economic environment. The aftershocks of the following three top world events still continue to bother the global financial markets months after their occurrence. First, in June, the United Kingdom voted to leave the European Union, second, in November, Donald Trump was voted into power as the 45th president of the United States of America, and third, Italian voters voted for the Italian constitution to remain the same during the December referendum.
According to Emma Lunn of the Telegraph: “The political surprises of 2016 have had a significant impact on interest rates, currencies, inflation and, potentially, economic growth. So, with voters showing themselves to be nativist, nationalist and protectionist, is there a chance that far right groups will triumph in some of the elections due in Europe in 2017? And what impact could this have on investors?”
Unfortunately, the latest news out of the UK; ergo, the holding company, Food Retailer Operations Limited, which operates 34 Budgens stores has gone into administration, should not surprise us. Consequently, over 800 jobs will be lost. Is this a direct consequence of Brexit? I am not sure; however, I suspect that it is a more than likely a result of the slowing economic conditions that is taking place in many of the world’s major economies.
Thriving in spite of severe market conditions
In spite of, and as a direct result of the current global instability, asset prices on the world’s financial markets tend to fluctuate widely from day to day. This, therefore, begs the following question: “How do you invest in financial options without being affected by the current market volatility and uncertainty?” Here are a few tips which are designed to help you survive under the challenging market conditions:
Determine your risk profile
I believe that you will have to move out of your comfort zone to realize significant financial gains. What is your risk profile, or how much are you prepared to risk to increase your wealth? It’s important to know where your boundaries are so that you do not step out of them; consequently losing your entire investment. What happens when other traders start jumping ship because the risk is too high for them? Are you prepared to hang in there, or are their valid reasons for getting out of the market? It is vital that you have the answers to these questions before you start trading in financial options; otherwise, the best investment strategy can turn into your worst nightmare if you don’t see it through.
Stick to your investment strategy
It is equally important that you choose a trading strategy and stick to it. If you change your mind halfway through a trade, you run the risk of losing your investment. Trading strategies are mostly determined by the current market conditions as well as your reasons for trading in binary options. Both short-term and long-term trading strategies tend to suit market volatility. If you embark on a short-term investment strategy, you will open and close your position within a single day. Some trades can last for a couple of seconds right up to 1 day. The important point to note is that you need to open and close your position within a single trading day.
On the other hand, the premise for employing a long-term trading strategy is that market prices increase over a period. You are not bothered by the day-to-day noise in the market.
Research the underlying asset price movements thoroughly
It is important to research the price movements of an underlying asset before you choose to place a trade on it. You need to look at statistical data showing how the price has fluctuated in the past, and you need to look at predictive models to determine how the price will more than likely move in the future. Added to this research, you need to consider the current geopolitical and socio-economic events. Once you have looked at as much information as possible, I believe that you will be in a position to make a wise decision regarding your trading strategy and your investment amount for the particular trade.
Increasing your wealth profile is not easy under the present harsh and unstable economic environment; however, I believe that it is possible to invest successfully and to thrive in spite of the global financial market volatility.