As Chief of Staff of a top Forex technology solutions company, I am frequently asked about the long term implications of major market movements. The global financial markets are undergoing the largest downturn since 2008, with the current turmoil in the markets having started with China. In recent years, China encouraged a real estate bubble, since land ownership was effectively the only way the government allowed people to invest their money.
While the Chinese government began offering its citizens the ability to invest in the domestic financial markets in 2014, the financial markets in China were highly leveraged as of 2015, and it was only a matter of time until the bubble will burst. Indeed, the financial markets worldwide went up impressively at the beginning of 2015, and it has been noted that after a major incline there is often a decline.
The Chinese economy suffers from a number of domestic problems. Alongside the real estate bubble, which created ghost cities throughout the country, it also suffers from declining growth because it is heavily based on foreign and not domestic consumption, which is low. Whereas other economies like the US, Japan and the strong European countries keep domestic consumer spending high. Also, throughout the US, Japan and the Europe, economies are much healthier and more liberal than the Chinese economy.
Based on my previous experience as Leverate’s Trading Optimization Director, what made the recent disruption in the financial markets worse was how the investors began to have panic attacks. If you are already invested in the financial markets, I suggest remaining calm and sticking with a rational trading strategy Today we started to see a recovery and the financial market started to go up again. Going forward, here are some tips for improving your market performance:
• Continue to trade as you used to. Stock prices are likely to remain reasonable for the near future.
• A smart investment takes the long-term picture into account. It is not based on borrowing money in order to stay in the market.
• When investing in the financial markets, you need to be patient and understand that there are ups and downs, but generally the direction is up.
• When trading becomes volatile and energetic, it’s impossible to predict future movements with 100% certainty. This is why it is important to use hedge instruments like options that can give you some security regardless of whether the financial markets go up or down.