This Is Why New Traders Must Beware Of Market Volatility
Sometimes market volatility is very narrow, but sometimes it can be very wide. Traders who can take advantage of price volatility can benefit. But if not careful, price volatility can make a trader go bankrupt. How do traders respond to this volatility? Meanwhile, before we continue, you can go to http://www.volatility75.net/ if you want to know more about market volatility.
On January 15, 2015, the financial world was shocked by the shocks of the Swiss Franc (CHF) currency. Swiss National Bank (SNB) suddenly announced it was removing its currency limits. Initially, these restrictions were made to prevent the Swiss Franc against the euro. The limit was applied in 2011, keeping the Swiss Franc at no less than 1.2 per Euro. Or in other words, the Euro is not allowed to weaken below 1.2 against the Swiss Franc. The policy was implemented so that Switzerland would not be flooded with funds from Europe. As we know, Switzerland is a safe haven in the financial world, famous for its banks that are global and stable.
With the flood of funds from Europe, the Swiss Franc continues to strengthen. Switzerland certainly does not like the condition of such currencies. The most obvious reason is that that is bad news for domestic exporters, making their products less competitive abroad. Switzerland is known for its high-value exports, such as watches and medicines.
What happens when those restrictions are removed? In just a matter of a few hours, the value of CHF skyrocketed against the Euro and the Dollar. The Swiss franc rose to 41% recorded against the Euro. The biggest increase in history. Conversely, the value of the Euro against the Swiss Franc (EURCHF) dropped. Drops like a falling stone. There is no square off.
Many traders experience losses, especially those holding Long positions. FXCM Inc., one of the leading forex brokers, said its client owed $ 225 million after the Swiss National Bank’s decision. Global Brokers NZ Ltd said losses from surging francs forced it to close. IG Group Holdings Plc estimated losses of 30 million British pounds ($ 45.5 million) and Swissquote Group Holdings SA suffered a loss of 25 million francs ($ 28.4 million).
Traders must be aware of conditions like this. Traders can either trade according to their abilities and always put a “Stop-Loss”.