Politics and Economics in Forex

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Politics and economics at a glance are not related to each other, because these two things are like two different worlds. Politics looks more crowded than economics, and there is more drama than economics. However, both at the macro and state level are actually interrelated. Many political decisions that affect the economy of a country and vice versa.

At the macro level, politics that influences the economy, for example, is government policies in the areas of exports, imports, increased economic growth, tariffs, taxes and others all related to the economy. Conversely, the economy can also influence politics, ranging from the ups and downs of prices of consumer goods, actions and actions of large companies that harm society and so on.

As mentioned before, there are four main things that traders must pay attention to for forex trading, sometimes traders are also not ready for political news as often happens lately in the United States. The ongoing trade war is an example of political policy that has an impact on macroeconomics and forex traders. Many technical-focused traders cannot understand and see the direction of this political policy in their forex trading.

It is undeniable, political policies sometimes emerge suddenly and can damage the fundamentals that are built up from economic data. This distortion often occurs on a small scale when there are public officials speaking about economics. A greater distortion is occurring at this time, when a trade war is raging and between China and the United States imposed tariffs for each other’s products. This is not an easy thing for economists and traders to analyze.

Another example is Brexit. Brexit issues continue to drag on the process and there is no clarity that certainly makes traders as cautious with everything related to the UK. The pound currency also looks depressed and cannot recover from pre-Brexit levels. No one knows for sure where the UK is heading, and it even got worse after the PM May said step down in June 2019. Uncertainty increased after the Brexit party won the European Union elections and controlled Britain’s representation in the European Parliament.

Such uncertainty is the reality that traders must face. So, how to react? Responsive and reactive to the news is one way that can be taken. Being responsive to the news is always alert and prepared for the possibility of speeches or things that can change the market both fundamentally and technically. Reactive is quickly responding to changes that occur and the impact on our trading position.

Read also : Trading Techniques and Strategies with Bollinger Bands

Of course, money management is an important thing that must be the basis of all actions, regardless of whether or not there are political news could shake the market. In times of uncertainty in this world, it’s good to be tighter in this money management. Because, we can not be sure what happens in the future according to initial predictions, especially if there is suddenly a speech or something else that can change the course of the trend.

The importance of installing stop loss (SL) is also a matter that must be considered. In both stable and volatile economic conditions, SL must remain and be a part of trading. It is better if loss is limited than continuing in a state of minus so that it holds other activities hostage, and makes us unable to maneuver more freely in subsequent trading. If SL is already installed, at least we have installed the brakes so that it does not enter into the abyss of Margin Call or Stop Out.

Considering the politics of trade war will continue and it also seems to be a long time, as traders we can be more careful in trading and more alert. Stay on top of the latest news about the world economy, it will help prevent excessive panic in trading and see market dynamics. The Brexit issue also needs to be watched out, considering that it will be a long time and the drama will continue until at least October 2019 or maybe more.

We can not choose the conditions under which we will trade, but we can limit the existing risk with the capabilities we have. We must not be dragged down by political currents that make our trading emotional and irrational in making entry decisions.

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