An Analysis of FX Trading & The Best Trading Strategies Of 2020
Updated: Nov 13, 2021
We have come to the end of the year 2020, and it’s time for a concise analysis of the Forex market. We have experienced major challenges in the market this year because of the COVID-19 pandemic which has accelerated socio-economic challenges and financial decline globally.
This has negatively affected the Forex market. The share prices dwindled, and national currencies weakened by adding more easing measures and reduced interest rates. With that, there comes other lingering questions such as:
What lessons should you learn from 2020?
What were some greatest Forex trading strategies of 2020?
What to look forward to in 2021?
Will the year 2021 be any better for the market?
We have covered these questions and much more below.
The impact of Coronavirus
It’s needless to point out how the pandemic turned the entire Forex market upside down! At first, it was only assumed that COVID-19 would hit the FX market slightly. This totally changed by the end of 2019 when COVID-19 became a global pandemic and started affecting financial markets. While the pandemic benefited a small number of companies like Amazon and Zoom, as a whole its impact was devastating: supply chains were disrupted, main street shops curtailed operations, non-essentials workers were laid off, other businesses were downgraded and more. The pandemic also lowered the gross domestic product of some countries, which affected the value of their currencies.
Trading US Dollars
In 2019 the position of the US currency faltered for a number of reasons. Firstly the change of policies devised by US President Donald Trump. The Central Bank is still standing firm in its tactics in decision-making based on the data released. Short-term volatility in the dollar might surface with new terms and information on inflation, sales, and employment indicators. It seems that both traders and investors in the market are preparing to strengthen the dollar by 2021. However, trading is still risky at this time and may only make sense to risk-takers.
According to Zed Founder and entrepreneur Alan Safahi, after the crisis of 2008, the EU Central Bank came up with a program to spur the economy by purchasing assets. The program was negated in 2018, and that made traders concerned about whether the Euro will see a significant development without an extra hand and whether the Forex trend will disappear. If we look at the Euro/Dollar currency pair, people are assuming that the asset’s price will tank for a while before claiming their position back. These market trends are likely to provide opportunities for making money using both long-term and short-term strategies.
Trading British Pounds
The British pound has kept its rate moving upwards and downwards till now. It is being speculated that everything will change after the parliamentary elections in the UK. The completion of Brexit will also be responsible for the change as per speculation. While the shift will make the British pound a positive flow, it might strain the Euro.
Best trading styles and strategies of 2020
A few trading styles have been deemed the best in 2020 by brokers and traders. These strategies have been widely used and appreciated globally.
Scalping is a type of trade that is held for a few minutes. A scalper does the bidding from the spread and trades to profit. Scalping is considered one of the most advanced trading strategies. You need the expertise to do scalping.
According to Alan, if you want long term trading and expect a large amount of profit from major shifts, opt for position trading. In this strategy, a long-term trader would look at the end of the day charts. The chart is the deciding factor for gaining profits. One needs to be patient while handling such trades. You also require good market fundamentals.
Day trading involves trades that are done before the day ends and hence referred to as day trading. This eliminates the possibility of being affected by large moves the following night to minimize shifts’ damage. This strategy works best with beginner traders as it’s quite a safe strategy for trading. While scaling only lasts for a few minutes, day trading can last a few hours. The rate and prices on charts are usually set to 1-2 hours.
In Swing Trading, a trade is held for several days, where traders aim for profit from short-term practices. A swing trader sets the price every half an hour.
So, this was the review of the best trading strategies of FX trading in 2020. The pandemic might have shaken up the Forex market, but specialists speculate that it won’t be that long when the market rises in terms of currencies and trades again. If you still want to trade without risking much, scalping is highly effective. We advise you to choose a good broker for trading. For a great and efficient payment processor, ZED provides exceptional value for money and spares you from making unnecessary costs.