How the coronavirus crisis is affecting forex volatility?


Multiple economies taking a hit around the world which impacts market intense crash as Coronavirus spread rapidly through the globe.

World economies suffer due to increasing safety measures, whole county lockdowns and high supply demand. Millions of people remain off work, schools, public places and thousands of businesses remain closed resulting in global financial markets and Forex experience extreme volatility conditions.


What is Coronavirus?

Coronavirus or COVID-19 is a type of virus that takes its origin from animals and was transmitted to humans. The pandemic spread around the world started with China and then was rapidly transmitted to the majority of world countries, which caused whole regions to force quarantine conditions and isolate populations.

Obviously, these events result in deceleration of the economy and world businesses as factories had to shut down, travel capabilities are snoozed and normal work conditions inhibit.

Therefore, Coronavirus’s negative affect on the economy spread increasingly high risks as markets influenced by the headline news making unpredictable and rapid spikes on the direction or another.

Obviously, the world economy decelerates its development which also caused the weakening of currencies and global markets, stocks and instruments bringing a crisis situation affecting market volatility.

Of course, together with panic and fear of population and market players as well, which is always among the strongest market moving marks, makes it all the riskiest environment for trading.

What is Forex volatility?

Forex Volatility is a term refers to price fluctuation or changes that are measured relative to an average price for the period of time. Eventually, volatility is what make trading possible as traders speculate on the price changes specified for the certain instrument, time frame and of course taking either selling or buying order.

Volatility defined in each instrument by few factors including Market Volatility which increases during the uncertainty, unexpected conditions or news, like we are facing now. This means exchange rates and markets fluctuate dramatically while upon opening may see huge gaps between the prices and along with the trading session fall or rise within a seconds.

Besides Currency-pair volatility also influenced by the country’s economy characteristics, that are striving hits now due to lockdowns and quarantine conditions affecting volatility even more.

Due to this trading being already risky activity under high volatility conditions may quickly swamp strategies, and reflecting on the extreme risk so it is better to take sidelines for many traders.

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How much Coronavirus impact Forex Market?

If we will consider a recent impact on Forex markets we can we that Stock Markets had a rapid change facing huge losses as Coronavirus started to report an increasing number of deaths and contagions number.

Looking at the chart of the world Indices, Stock Markets and other instruments the trend tool a certain downward Bullish direction as uncertainty created its negative effect as early as since February 2020 and continues to its spikes known already as Black Monday reached out on 9 March.

  • Black Monday saw Global Markets and Oil prices collapse in one of the largest single-day loses since the financial crisis of 2007-2009

Definitely Shares and other instrument became riskiest assets for investors as world companies was hit hard dropping for over 20% or more, depending on the instrument.

Obviously, the pandemic reaction of the market and further uncertainty making the situation less plausible as we are seeing more and more restrictions applied along with the ongoing Oil Price War between the world leading countries.

  • Numerous economic impacts due to lockdowns and restrictions over movements faced from large geographical and economical areas along with shut down of businesses, events and activates all strongly impacting Forex market volatility. 

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How to trade under high volatility conditions?

Forex Trader should keep an accurate eye on the trading positions and definitely should learn how to trade under high volatility conditions or at some point better to avoid any trading activity due to very high risks involved.

  • During uncertain conditions markets make unpredictable moves to the direction or another, as well as opening with huge gaps making swing trading strategy at high risk

You may need to re-organize your trading strategy, apply sharp risk management and keep your account safe as negative impacts may catch you in a blink of an eye. Along with the restrictions applied by the world exchanges you should also monitor your broker updates, as companies also apply some restrictions over positions, leverage you may use and other measures.

If you’re a beginner trader or just learning strategy it is strongly recommended to avoid activity so you better take a step back and trade only when having a clear state what happens.

Otherwise, trading under high volatile conditions is right like gambling making you lose or win everything right like the bet.

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Although there is no way to know what the lasting effect of COVID-19 could be on the world economy and financial markets, it is always better to take precaution measures, especially while trading. As long as European, US and other countries lockdowns continue this crisis will bring a significant effect on the world economy including businesses and individuals while measures and support may lessen the impact.