Perspectives for Investors in Times of Crisis

Due to the actual volatile nature of the Forex market, some investors are in a cautious position and evaluate the possibility of withdrawing all their investments, hoping to enter again when the market would improve. In this context, diversification becomes paramount since it allows to realize small investments, although with a short term target and with little profitability. Nevertheless, in times of instability, this turns out to be favorable anyhow, since a secure investment makes possible to coordinate the targets in a gradual form.

Is it possible to invest during an economic crisis?

Although there are many investors, not everyone of them possesses the same ability to invest. An example of this is related to small investors, who are in a very uncomfortable position to take profitable decisions in the short term, because the economic crisis is a consequence of a series of situations as: (a) the price bubble of the real estate sector, (b) the price increase of consumables, (c) the credit limitation, (d) the fall of the dollar, etc.

Nevertheless, although circumstances are apparently unfavorable, it is still possible to invest on the Forex market, since this type of investment tries to benefit from the opportunities given by the market. The first thing we should do is to analyze what type of investors we are, to then be able to make decisions according to our profile.

1. Conservative strategy

Basically, in times of crisis and uncertainty, the objective of this strategy is to generate profitability without assuming major risks in order to preserve the capital. Even in moments of a high volatile nature, the recommendation is to invest in the short term, where you can find a great deal of opportunities.

This strategy is, though, adapted for conservative investors, who will hold on to it until the market shows signs of progress. Once this happens the investors will be able to change their position aiming for an investment diversification and assuming the necessary risks in order to increase their capital.

2. Aggressive strategy with intention of investment.

This strategy is used by the type of investors who want to obtain results in short and medium term, assuming a greater risk towards a superior level of gains generated by the high volatile nature. Nevertheless, it is important to bear in mind the following aspects:

• The volatile nature on the economic markets at the moment of investing, and the difficulty to predict their future course;

• The risk that one is prepared to assume, implying so much a major responsibility on the losses, as the possibility of a greater profitability;

• The ability to accept the fluctuations of the market without trying to alter them, since this sometimes bears greater losses or less profitability.

The falls on the potential markets generate investment opportunities, although these are very selective and focused. It is always preferable to choose those opportunities that have a greater degree of profitability making use of the high volatile nature of the market.

What can we do in front of an economic crisis?

Many persons are surprised when someone says to them: "If the market is uncertain and in crisis, you must invest ”. They can counteract this phrase by saying: "In what world do you live? If there is an economic crisis I will lose more!”

Well, this is not necessarily true. When the market is in an economic crisis this affects all the competitors and not only you. Therefore, the one who develops the best STRATEGY will be the one who stands out.

The following are some of the alternatives that we can put in action in front of an economic crisis as the current one:

1. Keep on investing. It is not necessary to invest everything, but you shouldn’t stop investing in a selective and prudent form.

2. Diversify the currencies to increase the profitability.

3. Analyze the risk margin. This should be done always, with or without an economic crisis on the way. We must decide which quantity we are ready to lose in every deal.

4. Administer the money in accordance with your portfolio and your targets.

5. Use stop-loss orders. These are a must for every Forex investor, since they prevent losing the whole capital in just a couple of deals. Also, they are very important as a guide to plan our risk-reward relationship..

6. Follow up the sequence of your investments, to be able to control and to compare the results in the short term. This will allow to identify the strong and weak points to be considered in future decisions.

7. Be disciplined at the time of investing and studying the results of our decision, to identify points of progress.

Remember, the crisis shall pass. The best prepared investor will be who survives as well as the one who does not neglect money management essentials.