When people start trading forex for the first time, they wonder whether forex trading can be profitable in the long run, especially taking volatility into consideration. Over time, the economy can take directions we don’t expect, and with how easily forex is influenced by these shifts, things can quickly go downhill during less favorable moments. One thing that lots of traders focus on is recession. In many cases, recessions are seen as a chance to make more profit. Is the forex market recession proof, though? This article will tell you more about this aspect and whether you should invest while a recession is happening.
The Forex Market – Is It Recession Proof?
Forex trading involves working with currencies from all across the world. Because the market is available on a global scale, it will deal with all sorts of currencies. So, any economic factors can influence it, meaning it only makes sense to wonder what will happen if a recession took place. Well, the forex market may become a bit resilient when such economic events take place, but it’s not fully recession-proof. Many times, experienced forex traders know how to take advantage of a recession by turning to certain currencies that they believe will maintain their value. It was the case during the COVID-19 pandemic and even during the Financial Crisis of 2008.
Governments and central banks come up with new fiscal and monetary policies to fit the new economy, which can result in shifts in currencies that bring new chances for forex traders. For instance, traders may find new profit opportunities when a country’s currency depreciates due to lower interest rates. The forex market is also able to easily respond to any new market conditions due to being available 24/5.
Should You Keep Trading Forex During a Recession?
Trading during a recession may sound challenging. Recessions are very unpredictable, which means that your portfolio will be affected by such an event. Investing in forex during these moments can however be a very good thing, because you can take advantage of different fluctuations in currency and find opportunities for success. Exchange rates tend to fall, rise, or keep themselves stable, so regardless of what direction the market takes, you can still make some profit as long as you know what you’re doing.
But trading during a recession is great both for new and experienced traders. As a beginner, this is your chance to learn more about how the market works and gain some experience. Also, if you want to trade without too many risks, then trading forex during a recession can be a good way to enjoy a low-risk environment.
Final Thoughts
The forex market is not fully recession-proof. You can still trade safely during recession events and gain more profit. Make sure to pay attention to the market shifts and notice the way the value of the currencies fluctuates over time, and you’ll know what to do while trading. Don’t forget – you don’t have to be the most experienced trader to trade during a recession.
