There is no getting away from the fact that the COVID-19 outbreak has affected almost every aspect of the world’s day to day lives. From people’s movements to their social gatherings, to the strain on hospitals, and even on the global markets – nothing has been immune to the crisis, not even Bitcoin.
The COVID-19 outbreak may have even sparked a global recession, and set back the previously well-performing stock market a good few years.
However, while shocking and fast-acting, traders should be mindful of what the COVID-19 outbreak actually means for markets.
The fear and uncertainty that arrive with recessions make for highly volatile markets that are the perfect opportunity for traders to profit.
If traders follow the five points below about how to act in a time of market distress, they will quickly see that it is not all gloom and doom, and in fact, this could be a chance of a lifetime.
1) Act smart
While the world is panicking at the severe drop in the value of a number of different assets, and looking to sell and take as much profit as they can, there is ample opportunity to cash in on cheap assets.
This is a tough time to be entering the markets due to such extreme fear caused by COVID-19. But as the famous quote from one of the most successful traders in the world, Warren Buffet, says:
“Be fearful when others are greedy and greedy when others are fearful.”
Fearful times never last, and it is the smart investors who are able to make profits when things start turning around as they were brave enough to act early and time the market turnaround perfectly.
At the moment, there are several highly distressed assets. Oil is in the midst of a price war, and it is being oversupplied.
Of course, stocks and market indices are down, but these are usually high performing assets and once the impact of the virus abates, they certainly go up, and the same goes for foreign currencies.
2) Have the trading right tools to profit
Of course, understanding that in this time of panic there are opportunities to be made is one thing, but traders also need to be equipped with the right tools to trade efficiently and effectively to make the most out of these rare times in the markets.
The issue is, especially in more nascent markets like Bitcoin’s, that times of panic can lead to strange operations. Bitcoin exchanges have shown that they are not often robust enough, or experienced enough, to deal with such extreme volatility and this leads to downtime – even hacks and issues affecting client’s money, and their chances to trade.
At a time like this, it is imperative that users seek out well established and respected trading platforms that not only offer security and peace of mind, but many different trading tools and assets to best serve users looking to trade smart.
To this end, PrimeXBT is one such platform taking decades of traditional market experience and applying it to the cutting edge technology and innovation surrounding the cryptocurrency industry. PrimeXBT offers traders the tools professionals have come to expect, such as the ability to take long and short positions, or up to 1000x leverage across forex, commodities, stock indices, and cryptocurrencies.
The ADVFN award-winning platform provides a reliable trading engine with up to 99.9% uptime, and includes ways to mitigate risk and bolster profitability admits the record-breaking volatility.
Moreover, the platform rewards the most active traders, taking multiple positions across a variety of assets, by offering a progressive fee discount system. And with so many assets traders can build a well-diverse portfolio to further reduce risk and maximize profit potential.
While some may prefer traditional brokers such as Saxo Bank, those seeking a more robust and innovative experience need to look no further than the PrimeXBT trading platform.
3) Analyze history
Part of acting smart and arming oneself with the right tools for success also involves looking back at the history of similar situations in which the markets have inevitably come out of, and come out of stronger. The COVID-19 outbreak may seem like an unprecedented occurrence, and in many respects it is, but there have been global pandemics before, and the markets have dealt with them before.
One of the most deadly pandemics the world has ever seen was the Spanish flu in the early 20th century. But, looking back at how that played out, and how the markets reacted, there is already evidence of parallels that can be drawn, and a case for a market recovery.
Great Hill Capital’s Thomas Hayes has done some investigating as to how the markets went in the Spanish Flu pandemic, and noticed some interesting trend lines. According to Hayes, the markets actually started to recover before the worst of the Spanish Flu had hit, and this could be the case for COVID-19 as well.
“So while the worst was ahead in terms of the Spanish Flu in December of 1917, the worst was done for the stock market after the 33% drop,” Hayes wrote. “The difference now is that we have better medicine, methods and experience to mitigate the outcome. The market has already discounted a lot of pain based on its current drop,” he said. “It will be just as quick to discount a recovery once the initial shock subsides.”
Additionally, although we may be primed for another recession, it is still worth doing research on the impact of the recession on GDP as there are indications that the impact may not be as bad as many imagine, and most pandemics only see their impact lasting a maximum of two quarters.
In the past, each time there has been a major hit in the markets due to a black swan event like a pandemic, there has always been a V-shaped recovery that follows. This historical marker should show traders that the best time to trade is at the bottom of the V, which according to the Spanish Flu example, may be before the worst is over.
4) Keep your head cool
Of course, in these times of fear and uncertainty, there will be opportunities, but also potential for increased risk due to higher volatility levels. We have seen the volatility in the Bitcoin market both up and down, and even the usually calm assets are moving more than they are used to.
It is in times like this it is imperative to stick to your risk management strategies and not to let sentiment, fear, or greed dictate how you trade. Having a trading plan is step one for any good trader, but having one for times like this is a must. It is even worth updating your plan so you can stick rigorously to it.
Other careful strategies should be in place, especially to mitigate big losses and liquidations, use tools like stop loss positions and take profits where they are on offer. Greed is good in a time of fear, as Buffet says, but don’t let greed overtake you and leave you missing chances and losing big.
PrimeXBT provides traders with built-in charting tools for carefully planning trading strategies prior to taking a position. A combination of leverage and carefully placed stop orders can ensure no trade is ever too risky in any situation.
The key in trading at this time is sticking to a planned strategy, and that strategy will keep your head cool and ensure you make money, as well as save money in a time where there are a lot of losses.
5) Stay safe. Improve skills
It is also worth mentioning that this COVID-19 outbreak is a real chance to make some money if you follow the above tips and are clever with the opportunities and platform you choose, but it is also a critical time across the globe for health and safety. The globe has been asked to stay home and stop the spread of this virus, and to support the vulnerable.
For many, they will feel trapped and holed out at home, but it is far more important to do our bits and stay home, and stay safe. Trading is one sector that can be done from home, and it is something that has so many facets to it that there will never not be something new to learn.
Why not take this time to sign up to a new trading platform and experiment and learn more about trading, or improve your trading skills? There will never be a better time as there is so much happening in the markets that you can boost your knowledge on fundamental analysis, research the markets and their sentiment to the virus, as well as have volatility to really time you buy low, sell high, skills.