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Greek Debt Crisis and Its Effects on Your Investment Accounts

Jul 08, 2015 10:49 am
analyst75 User

Сообщения: 128
Зарегистрирован: 22/11/2014

“When I put on a trade, all I expect is that something will happen.” – Mark Douglas



With a great interest, I’ve been watching the events in the Eurozone. I didn’t write about Greek debt crisis because I wanted to see how things turned out. Many economists and financial journalists have written interesting articles about this issue, stating the causes, effects and possible consequences. I don’t think repetition is mandatory.


What’s happening to Greece is what a nation eventually suffers if their government can’t spend within their means. The US government is another good example of a government that can’t spend within their means, and wise people now ponder the dire/grim consequences that would result in future.


Greece has serious economic problems, and she’s now been given this week to submit a new reform plan. In spite of Eurogroup meetings from time to time, no solutions have been agreed upon. Eurozone leaders will meet on Sunday to try to reach a new deal.


Greek Withdrawal from the Eurozone

Experts are debating whether Greece would eventually quit or be forced to quit the Eurozone. It’s possible that Eurozone leaders and Greece would be able to agree on viable solutions; otherwise, the inevitable might occur. Anything is possible, and of course, with grave effects. 


It is expected that if Greece withdrew from the Eurozone, the withdrawal would cause a great impact on Greek economy, Eurozone economy and world economy. But no matter what happens, the sun will continue to rise in the east and set in the west. I don’t expect any serious effects in the currency markets.


Current and Future Effects of  Greek Debt Crisis on Forex

Since the media started shouting about the Greek debt crisis, there haven’t been any serious effects on the Forex market. The press will always try to find something to write about and whenever the market moves, analysts will try to pinpoint causes for the movement.


The market has a knack for going against people’s expectation. Events that people don’t anticipate are what cause surprise moves, not events that people anticipate.  People didn’t anticipate the unprecedented CHF pairs volatility and there were surprise consequences. Another instance of an event that caused surprise movements was the last major earthquake in Japan, which also caused nuclear fallout. 


There are years in which the markets move very strongly (like the year 2008) and there are years in which the markets don’t move very strongly (like the year 2014). Speculators, especially trend-followers, find it easier to harness decent gains when the markets trend strongly.


When the market goes into an equilibrium phase, then sooner or later, there would be an increase in volatility. Conversely, a strong trending movement would eventually lead to low volatility and more predictable outcome. Time indeed factors in economic events and resulting financial consequences.


Within May – June 2015, there was low volatility in the market, and as a result of that, trend-following strategies suffered. Nevertheless, a measure of volatility has returned to the Forex market since the end of June.


Someone who’s seen oceans and seas will definitely find a pool in the bathroom negligible. On June 29, 2015, the EUR pair and JYP pairs gapped downwards massively. They later bounced upwards and began to trend downwards the following day. They then consolidated till the end of the week. The same price action was repeated on EUR pair and JPY pairs this week, though the downwards gaps were less significant than the gaps of the last week.


What has happened in the market so far is nothing special and nothing special will happen in the weeks and months to come. Any movements or gaps we see won’t be more serious than what we’ve seen so far since the beginning of this year.


Many Will Survive the Markets Unpredictability, You Can Too

Some people want to stay away from EUR pairs, whereas there’s no movement on them that’s more serious than the movement on AUD pairs, NZD pairs, CAD pairs and JPY pairs. Don’t expect any surprises when the public are anticipating them. Surprises come when the public don’t anticipate them.


EUR pairs would continue to move up and down - as usual – but there’ll be no great deal about that. What happened to EUR pairs on June 29 had an adverse effect on me. I’d 3 long positions that were all stopped out at 0.75% loss (0.25% X 3 = 0.75%). Was there a big deal in that?


What happened on July 6 had positive effect on my short trades and I gained 2.0%. Again, there was no big deal in that. The market may move slowly against you or in your favor. The market may move fast against you or in your favor, but you’ll be fine as long as you truncate your negativity.


Please remain faithful to your positive expectancy trading method – in times of losses and in times of gains. Life isn’t a matter of holding good cards but of playing poor cards well. Nowadays, no trader has been dealt perfect market conditions. Often, the secret to gaining control is to both accept those circumstances and manage your trades within the limitations the markets impose on you.


As long as portfolios are concerned, many traders will survive the uncertainties of the future. May you survive as well.


So Greek debt crisis can’t have any adverse impact on your accounts, if you know how to control risk. Though I find articles about the Eurozone interesting, I don’t worry about how that can affect my accounts. That’s the beauty of trading.


Waiter, another bottle of Pepsi, please!


This piece is ended with the quote below:


“Traders who devote less time to trying to beat the markets and more to mastering their own behaviour and emotion will often outperform those who go in all guns blazing. Trading at the end of the day is a long-term educational process and understanding this and having the patience to develop your skills properly will prove more fruitful in the long run.”– Ryhun Rahman