What should traders do during risk adversion environment?

What should traders do during risk adversion environment?

Risk adversion refer to the behavior of traders when there is uncertainty in the market that prevent forex traders from maintaining or taking more risk postion. Financial crisis in 2008 or Ukraine tensions now are typical examples of risk adversion situation. During this time, the market risk is unknown and hard to predict.

During the uncertainty situation, forex traders normally try to minimize their risk position by moving fund from risk assets to safe assets. In the forex market, safe assets include Gold, Swiss France, Yen and US dollar. Commodity currencies are considered the most risky assets in the forex market.

We can review back to see what happen in the forex market during the last week, especially on 24th and 25th of April 2014. In those days, the Yen and Swiss France held gains agains US Dollar while Gold also moved back quickly to 1300 from 1268, although most of the US economic datas were good.

For safe trading, it is better to reduce the risk per trade during risk aversion environment until everything is clearer and predictable.

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