Forex Strategy Video: A Lack of Returns Will Eventually Sink the Markets
• Risk-reward is the foundation of individual trades and the consensus of a market
• We have focused on the 'risk' element in the markets for the past 3 years as contentedness led to gains
• Recently, low volatility has not leveraged the same speculative run with doubt permeating sentiment
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Recently, we have seen how effectively fear can turn markets and encourage traders to sell. Yet, we don't need something a dramatic as 'panic' to encourage the speculative bearings on the capital markets to change tack. Investing is a measure of risk and reward. For the past three years, the focus has been held on the former. The thinking went 'so long as markets are steady, I can build my speculative position and attempt to beat the market'. Spurred by central banks' implicit guarantees and a benchmark that was nearly impossible to beat (the S&P 500), traders built their exposure. However, something has changed in 2015. Doubt is dominant while the combination of speculative reach and complacency have faded. With market volatility rising, 'risk' centric sparks increasing and conversations about return potential gaining traction; we need to re-evaluate our forecasts. We do that in this weekend Strategy Video.
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.