Trading in the coronavirus times


Fondex Representative
Amidst the coronavirus outbreak... Where do we start really? Our days are filled with breaking news on how many people have been affected by the virus, how many businesses have shut, what measures have been taken by each government to eliminate the virus' spread and so on and so forth. Indeed, the coronavirus is a pandemic. Following a domino effect, the world's economy is also being affected. Every sector imaginable.

So, as they say, "desperate times call for desperate measures", hence why all governing bodies across the globe are reacting to the matter timely enough to control a more negative outcome. Only recently did the NYSE close its trading floor and shifted to all-electronic trading, in order to protect the health and general wellbeing of employees and the floor community.

At Fondex, following ESMA's and CySEC recent recommendations, we have also dusted off our contingency and business continuity plans, and we are working from home. Although it was a bit of a transition, we quite like it now! One thing that has remained the same though, is the service and support provided to our clients. And this should be among every broker's priorities. Since psychology plays a very important role in trading, knowing that your broker is standing by you during these times should definitely boost traders' morale.

How is traders' psychology getting affected by all this though? We see the majority of investors in panic mode, selling off their portfolios to avoid prices dropping even further, and analysts constantly urging them to assess the situation with a clear mind and trade wisely. But don't forget that all this has happened before; looking back at different world epidemics over the past years, every one of them was followed by a dive in the markets, which steadily recovered some months after the events' peak.

Looking back in 2003, during the SARS outbreak and its 38-day peak, with a fatality rate of about 10%, US 500 dropped a staggering 12.8%. Just 6 months in, the index gained 14.59% and, in 12 months, it was up 20.76%. Similarly, the Swine flu (H1N1) in 2009 led to a global market drop of almost 5%, followed by a 20% rise just 3 months after its peak. Finally, the Ebola outbreak in 2014 caused another market drop of almost 5% and, 3 months later, it ended up with a rise of nearly 10%.

Numbers speak for themselves. That's probably why analysts advise traders to hold their positions, avoiding getting carried away with the fear that surrounds the market. Remember that, based on your strategy, long-term trading may be the way to go. And practically speaking, looking into our current situation with the COVID-19, as the virus spread in China is gradually stabilizing, Chinese markets have begun to outperform global ones in most instances.

For the time being, at the stage we are at, it looks like panic is more contagious than the coronavirus itself. Brace yourselves, assess twice and react wisely. History has shown that economies reach a good low before skyrocketing again. So stay at home, be safe, and don't forget to wash your hands!

Written by: Fondex team
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Trading at this point in time is highly uncertain due to the market being volatile. It requires much attention and discipline. But yes, trading is the most productive thing for utilizing time.