Before we go on to why Donald Trump is so popular among Forex Traders, it is necessary to understand what drives foreign exchange trades.
Simply put, Forex trading is based on the trade of one currency against another. When the price of one falls or rises, there is ample opportunity to make profits from investing in the currency that is rising.
For example, when the US market is in a huge tumble, chances are that if you are a Forex trader, and have a little experience, you could come out a lot richer.
A Short Summary
For starters, Forex trading market is the largest market in terms of volumes traded. This means even the slightest of rumors can cause the entire Forex market to change course in a matter of moments.
Factor that in when considering the impact of Republicans holding the Oval office for another term. But that is not the only point that is so important.
If you listened even remotely to Trump during his election campaign (even if you are not an American), you would know that Trump has promised a lot. That is the trump card here (pun intended).
Volatility for Freshness
Experts have argued that since most of global trade is conducted in USD, investors would be hard-pressed to hedge against a fall in USD to keep market sentiments stable.
This means that Trump’s win has actually helped reduce the adversity against USD prices. Since investors are now buying USD, the prices have suitably risen in comparison with other major currencies in the world.
The result?
Well, it seems to be a field day for Forex traders, who are reaping in big profits like never before. In short, the volatile market makes for an excellent playing field for Forex trades.
New Policies
One of the main reasons for Trump’s unexpected win seems to be new policies. Before his win, Trump had promised major tax cuts in a lot of areas, including the infrastructure sector.
This means that a loose fiscal policy, coupled with a tighter monetary stance, is expected. In layman’s terms, this is likely to result in more inflation, but at the expense of better foreign exchange rates.
How the Market Looked
Initially, as it became apparent that Trump was going to win after all, markets across the US fell sharply. This was in response to a lot of policies Trump had promised during his campaign, including low tolerance for immigration, isolationism, and a move towards protecting America’s interests.
However, this changed quickly after the overtones started changing with Trump’s acceptance speech. Not only that, since Trump is a clear anti-Mexican, the price of Peso is expected to fall sharply as trading prohibitions from Mexico are likely to come into place.
While the rest of the world might be looking at it from one perspective, it is quite different for Forex traders. In fact, these level differences are exactly what Forex traders look for in order to capitalize on them.
Is it Another Brexit in the Making?
Brexit showed how widespread the effect of policy changes can be on the global market. In fact, within a very short period of the Brexit results being declared, the sterling pound went down by 2000 points.
While this might not have been the best result for people who had heavily invested in the pound, it was a great day for Forex traders who had looked ahead to capitalize on these points. The same happened with Trump getting elected.
In fact, it can be said with certainty that the effect was much greater in scale, and is still growing. The level of volatility and uncertainty in the market caused by such news resulted in unheard of opportunities for investment.
The Market is Getting Interesting
While Trump’s election means that tax cuts seem certain, the implications for trade, Federal, and immigration policies are unclear at this juncture.
The shape these policies take will depend on a lot of other factors, such as Trump’s relations with Republican lawmakers and the chairman of the Federal council, whom he openly criticized during his election campaign.
In fact, according to global sentiments, US growth seems all but guaranteed. This is clearly shown by a weaker Yen and Euro and the USD’s consistently good performance in both Japan and Europe, two of the major currency holders in the world.
Conclusion
In view of the foregoing analysis, should you get into the Forex market now?
Definitely.
However, it is important to note that the current market is all about upheavals and changes.
You need to have solid research data in order to make any sense out of it at present.
Nonetheless, as long as you know what you are doing, you stand to make substantial profits with the current economic conditions.
In addition, ensure you get a good broker to assist you in your journey.
