How to trade when your country is in an economic crisis ?

[Attila the trader]

over the past few months the country's economy had being suffering , lot of macroeconomic issues and sovereign debt, so the market finally realized it and had being heading downhill fast , and the situation is only expected to get worse. I've liquidated pretty much all of my positions (for a profit) as I'm not comfortable with these conditions; and my strategy which is trend trading , doesn't work now . should I wade this out and get back when things become better (unlikely for a while) or should I change my strategy to suite the current situation , eg : short term trading of penny stocks that are not affected by the macros ?

 

[tomorton]

In turbulent times, responding to environmental conditions is even more emphasised than it usually is. Stock markets don't rise consistently. Long-term trends reverse dramatically on rumours or news stories or flakey economic forecasts or political tub-thumping. Fundamentals seem to be out the window.

Right now I would avoid stocks and indices except for intra-day momentum trades and for multi-decade value stock holdings.

Forex might give you more time to plan and react. The exchange rate of one currency in the pair is sometimes moderated by the other, so price volatility can be suppressed compared to individual shares.

 

[Farm Yard Forex]

I would use the time on demo to see if your current strategy can be tweaked in any way to suit the current conditions better.

 

[Henow1969]

I am likely to avoid real trading when my country is in trouble and has a solid economic situation.

 

[1nvest]

and my strategy which is trend trading , doesn't work now

I find this a strange one. Trend trading doesn't stop working. you can have an uptrend, or a downtrend. Just because an uptrend is over for stocks, it doesn't mean an uptrend doesn't exist elsewhere. similarly im sure you can find downtrends. The country's situation will have knock on effects in multiple areas.
Bonds may go down, i see bond ETFs in downtrends
Commodities go up, they have been flying since 2020. look at commodity ETFs
Precious metals are picking up, look at gold ETFs
if stocks isnt working, trust me there are always opportunities. Its not trend trading that's the issue, its the asset class

 

[HeavLeighGill]

I've been struggling a bit recently and haven't been trading as much for similar reasons, wishing you luck moving forwards

 

[Attila the trader]

I find this a strange one. Trend trading doesn't stop working. you can have an uptrend, or a downtrend. Just because an uptrend is over for stocks, it doesn't mean an uptrend doesn't exist elsewhere. similarly im sure you can find downtrends. The country's situation will have knock on effects in multiple areas.
Bonds may go down, i see bond ETFs in downtrends
Commodities go up, they have been flying since 2020. look at commodity ETFs
Precious metals are picking up, look at gold ETFs
if stocks isnt working, trust me there are always opportunities. Its not trend trading that's the issue, its the asset class

i was too vague what i meant was trend trading , the way i do with my desired time frame , indicators , risk tolerance etc. does not work , not that trend trading as a whole; of course i could go down to the 5 min charts and find a trend there but I'm not comfortable with it .

 

[Attila the trader]

I would use the time on demo to see if your current strategy can be tweaked in any way to suit the current conditions better.

yeah good idea , maybe ill even find a new strategy

 

[Farm Yard Forex]

Exactly. Always better to spend time on demo refining and experimenting. I spend more time on demo/Trading View than my live account probably!

 

[LuckyMac]

In turbulent times, responding to environmental conditions is even more emphasised than it usually is. Stock markets don't rise consistently. Long-term trends reverse dramatically on rumours or news stories or flakey economic forecasts or political tub-thumping. Fundamentals seem to be out the window.

Right now I would avoid stocks and indices except for intra-day momentum trades and for multi-decade value stock holdings.

Forex might give you more time to plan and react. The exchange rate of one currency in the pair is sometimes moderated by the other, so price volatility can be suppressed compared to individual shares.

Would completely agree. There is also the economic fall out of all of these stimulus packages across the world that the pandemic contributed too. None of these have been priced in or accounted for i dont think. Intraday smaller trades is what ill be doing for the foreseeable

 

[Attila the trader]

None of these have been priced in or accounted for i dont think

yeah i also think so , the current prices are not reflecting the larger economic condition , it happened in my country too , the market had a great run during the last few months , even though there had being a lot of macro issues , the market took a few months to incorporate it into the prices , when it did it suddenly started tanking .

 

[LuckyMac]

yeah i also think so , the current prices are not reflecting the larger economic condition , it happened in my country too , the market had a great run during the last few months , even though there had being a lot of macro issues , the market took a few months to incorporate it into the prices , when it did it suddenly started tanking .

Oh yeah for sure, i think the second half of this year is going to be completely different there are businesses in my country still receiving 5k COVID subsidies from the government that are coming to an end very soon and their bills and outlays were all 'deferred' or reduced which will be due. So many small businesses are going to find it hard to recover add that to inflation and its a recipe for disaster. I wonder do you think a 'Black Swan' event is coming or an actual slow-ish gradual decline?

 

[Attila the trader]

Oh yeah for sure, i think the second half of this year is going to be completely different there are businesses in my country still receiving 5k COVID subsidies from the government that are coming to an end very soon and their bills and outlays were all 'deferred' or reduced which will be due. So many small businesses are going to find it hard to recover add that to inflation and its a recipe for disaster. I wonder do you think a 'Black Swan' event is coming or an actual slow-ish gradual decline?

are you from the states ?
covid 19 crash was a black sawn event i believe , and we are still experiencing its effects , which I believe aren't still fully reflected in the prices . along with the Ukraine/Russia issue, inflation and the huge increase of money supply it is highly likely to continue going downhill , and whatever the positive movements in price are we see now are transient .

 

[LuckyMac]

are you from the states ?
covid 19 crash was a black sawn event i believe , and we are still experiencing its effects , which I believe aren't still fully reflected in the prices . along with the Ukraine/Russia issue, inflation and the huge increase of money supply it is highly likely to continue going downhill , and whatever the positive movements in price are we see now are transient .

From Ireland oh yeah for sure covid was black swan but wonder if itll be a gradual decline or another shock market event when hopefully the Ukraine-Russia situation is resolved. I completely agree, these positive price movements are akin to higher lows in a downtrending market imo we are nearing a 20 year cycle since the last crash in 2008 which would support the cyclical nature of the economies

 

[barjon]

On a monthly view we seem to be back to pre-Covid (and pre invasion level this month), albeit that FTSE has been going nowhere since 2018. Certainly it’s been a pretty strong upward trend since the Covid Crash. I must say, though, that quite why it should be so in the face of generally bad economic news that should have sent it scurrying in the opposite direction is a bit beyond me.

Markets have been propped up for some time by QE (aka printing money) and although that should be bad news for a single country, it may be that if all countries do it the relative relationship between them maintains the status quo. Bit of a head scratcher for me.

 

[Atilla]

over the past few months the country's economy had being suffering , lot of macroeconomic issues and sovereign debt, so the market finally realized it and had being heading downhill fast , and the situation is only expected to get worse. I've liquidated pretty much all of my positions (for a profit) as I'm not comfortable with these conditions; and my strategy which is trend trading , doesn't work now . should I wade this out and get back when things become better (unlikely for a while) or should I change my strategy to suite the current situation , eg : short term trading of penny stocks that are not affected by the macros ?

Hi Attila,

I was wondering what instruments or asset classes do you trade? You say you use a trend trading strategy.

Either way, there is the economic cycle between Bonds, Stocks Shares and Commodities that oscillate through good and bad times. Then there is inflation and forex markets to trade. If you are using a trend following system I'd imagine that could apply to quite a few different instruments.

Another point that hit me is the old debate about what moves markets. Are you into technical chart trading TA, fundamentals FA or news. What time frame do you look at for setting your trend? Is it over days, weeks or months.

Markets are at exceptional highs imo and it is good to be out of the market when in doubt. I fear continued market highs are limited and low probability. Market lows are a pretty steep drop and high probability imo. So on balance, better to out of the market than in. Alternatively, you might want to be half in half out. Half on defensive stocks with good dividends well covered by earnings.

I only put about 10% into trading penny stocks and usually lose. I try to avoid penny shares. The only decent penny share for me is LLOY at the mo. Recently made a loss with Velocys VLS shares and got out. However, having dropped to 4p it has started to rise again. Such is life.

All the best,

 

[Jungletrader]

Possibly just use the time to refine your trading on a demo account or a FX simulator.
Hoping things are getting better in your country

 

[Resolve]

Possibly just use the time to refine your trading on a demo account or a FX simulator.
Hoping things are getting better in your country

I am making use of the Demo trading accounts for learning about the markets.

 

[Attila the trader]

Hi Attila,

I was wondering what instruments or asset classes do you trade? You say you use a trend trading strategy.

Either way, there is the economic cycle between Bonds, Stocks Shares and Commodities that oscillate through good and bad times. Then there is inflation and forex markets to trade. If you are using a trend following system I'd imagine that could apply to quite a few different instruments.

Another point that hit me is the old debate about what moves markets. Are you into technical chart trading TA, fundamentals FA or news. What time frame do you look at for setting your trend? Is it over days, weeks or months.

Markets are at exceptional highs imo and it is good to be out of the market when in doubt. I fear continued market highs are limited and low probability. Market lows are a pretty steep drop and high probability imo. So on balance, better to out of the market than in. Alternatively, you might want to be half in half out. Half on defensive stocks with good dividends well covered by earnings.

I only put about 10% into trading penny stocks and usually lose. I try to avoid penny shares. The only decent penny share for me is LLOY at the mo. Recently made a loss with Velocys VLS shares and got out. However, having dropped to 4p it has started to rise again. Such is life.

All the best,

Hi Attila ,
I exclusively trade stocks (swing trading ) its mostly technical , at this point I definitely need some alternative instruments; but currently i have very little time to learn different markets , and trading styles. my plan is to wait till the markets becomes favorable for my strategy , until then ill be on the sidelines . i currently have liquidated everything ! , all cash ; but it wont be a good strategy, either as inflation here is horrifying , USD went from 203 rs to 280 rs, within this month !!! (I'm from sri lanka btw)

 

[Attila the trader]

Possibly just use the time to refine your trading on a demo account or a FX simulator.
Hoping things are getting better in your country

yep thats the best option