These are obviously exceptional times in trading the foreign exchange markets. As we all have heard the different yet negative bottom line scenarios from the Earthquake Disaster in Japan; how investors reacted to the price fluctuation of the USDJPY, the Sovereign debt crisis in Europe with Greece, Italy and Spain; with the ECB previous rate decisions to purchasing Government Bonds to ease the contagion effects on the EURUSD. And now with the S&P's downgrade for the US have left almost all financial markets from Stocks in the red.
These are exceptional times particularly in trading the financial markets; where the volatility index have reached their highs and where investors loss of confidence is overwhelmingly felt worldwide which can be seen on the market's performances worldwide. How does one investor and trader prepare to trade during these times of uncertainty? That is just one of the many questions that needs to be address before making any trading decision.
Focusing on the Foreign Exchange market takes more than simply buying/selling a currency pair. As the correlations and other factors affecting them are tied up to a lot of current global issues. Whenever such issues are 'Politically oriented and influenced' do expect an increase in volatility and a roller coaster ride from the three major markets. However, with these clouds of uncertainty hoovering in the air; the distinct advantage for those who has the conviction and the unbias outlook /analysis may well be in a better position to focus and sees a clearer perspective of the market trends. There will always be conflicting factors, thus making price swings erratically. Price behavior dictates price action as a response or a mere reflection of outside / fundamental factors. Market psychology does have an important role isolated from both technical and ffundamental analysis. And this can only be found on studying the price movements and behavioral patterns reflected by prices.
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