In March 2020, a severe blow was brought to the entire world market. The global economic situation escalated amid an outbreak of the coronavirus epidemic, the so-called COVID-19. Such a sharp fall in the stock, commodity and cryptocurrency markets has not been seen since the time of the global crisis of 2008. The worst collapse occurred after the official announcement by the WHO of the pandemic.
This situation has become the worst event in the last few years. The fall lasts more than a week, and the situation is aggravated by the negative expectations of investors and traders. Analysts are trying to assess the effects of coronavirus on the state of the economy. Fear of the spread of the virus is forcing investors to sell off their assets and flee the markets, which could cause a serious blow to the global economy.
The market is always cyclical and fluctuates like a pendulum – it is actively growing, and it is rapidly falling. You must continuously monitor the situation and act calmly, no matter how strong the panic. During a collapse, even professionals can succumb to a general panic mood and sell off assets despite the fact that everything can change at any time. It may turn out that the investor got rid of the asset right at the moment the bottom is reached, after which the quotes will rush up, and the player will lose an impressive part of the funds.
One of the main concerns about the fall of the forex market is the limitation of bonus codes. While a lot of forex brokers offer to its customers no deposit bonus codes, this could be the moment when the situation declines and the clients will have no access to this feature. Basically, a lot of Forex-newbies choose to be involved in forex trading because of no deposit bonus. We can compare their system to online casino no deposit bonus codes 2020, which unlike forex codes have not been affected by the coronavirus. One may say they are completely different segments though, in both of them, the client is offered a unique feature to receive a bonus without depositing money.
How will a market fall affect traders
The situation with panic is aggravated by those who are in a marginal position and use credit funds. For them, the losses will be more significant. And in this case, traders have two options: either build up their positions in order to reduce the risk of liquidation or close the deal by accepting significant losses.
For inexperienced traders, the result is unpredictable: either in a few minutes they will increase their capital several times, or at one point they will lose everything. Most Forex traders do not have a sufficient knowledge base and experience to trade, which is why they mainly lose money. Their trading is more like a game in a casino, as they do not have a well-thought-out strategy and a deep understanding of the situation.
How a market drop will affect the brokerage business
But for the broker, any situation will be advantageous: no matter what the outcome, the broker will not lose his money. Money on credit to investors and traders provides the broker himself. If the deal is profitable for the player, then the trader will take the main part of the income for himself, and the entire amount with interest will be returned to the broker. If the trader’s forecast turns out to be incorrect, the trader will lose a significant part of his funds or the amount in full. And the amount of collateral provided to ensure leverage will go to the broker.
How will the situation for brokers develop? Such periods of general panic for brokers translate into a massive increase in profits. During the fall of the Forex market, the activity of traders and investors increases sharply. Following it, trading volumes also increase significantly, which results in an increase in brokers’ profits not only due to trading commissions but also due to margin traders.
Although the situation with the regulation of the Forex market in the world remains unstable, brokers will succeed even in jurisdictions with strict regulations in such “black days” for the entire market.
This situation resembles a supernova explosion: a star lights up brightly, and then abruptly collapses and turns into a black hole. Large investors will find a secluded place to “wait out the storm”, and the bulk of traders will leave the battlefield since they have lost almost all their savings. Trading activity will decline and will gradually recover until the economic situation returns to normal, and negativity and skepticism turn into hope again.