Top Trading Lessons: Take Extra Caution Before Joining Popular Trades
The first quarter of 2020 turned traders on their heads as Covid-19 ripped through the global economy. Swift action from the Federal Reserve and other central banks backstopped the global financial system, and markets went on to new record highs. As the year progressed and markets stabilized, traders progressively shifted into a more risk-on stance. Bolstered by vaccine optimism, continued support and intervention from central banks, and fiscal stimulus, the main themes driving 2020’s popular trades look set to strengthen.
Nevertheless, in the age of the Internet, when traders can so easily share their ideas, it is important to stay mindful of outside influences on your trading and market outlook. This isn’t to say that joining popular or crowded trades is wrong in and of itself. However, traders are best served by being objective observers of the markets. Before joining a popular trade, or any trade, it is important to identify and separate outside voices before doing your analysis and due diligence.
--- Written by Thomas Westwater, Analyst for DailyFX.com
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.