derivatives trading

The current pandemic we are facing right now has resulted in economic uncertainties throughout the globe, pushing different companies to close down and leaving a number of our population unemployed. Because of this, experts warn us to buckle up for what’s coming ahead: the deepest recession on record that rivals the Great Depression.

In the U.S. alone, more than 38 million Americans have filed for unemployment claims nationwide because of the coronavirus blow. The number climbed within nine weeks since the pandemic started and is expected to further increase in the coming weeks. Internationally, the current crisis will affect almost 200 million full-time workers in the forthcoming months.

The unexpected crisis has left most of the population with no other choice but to find alternative income streams to cover their unemployment. Online jobs have been the talk of the town but some people have explored the trading markets to help weather the current situation. While there are risks involved with the latter move, employing several strategies can help win this economic climate even with limited knowledge in investments. 

Qries

Digital assets trading

Investing in digital assets can be lucrative. One thing that this investment instrument boasts is that its value is not as heavily influenced by the global economy. Even with the current recession, digital assets have had different price correlations to traditional stock markets. Compared to traditional assets, digital assets, or cryptocurrencies, offer greater global exposure to traders because they are available 24/7, and not only limited to specific trading hours.

“While cryptocurrencies are not likely to replace traditional fiat currency, they could change the way Internet-connected global markets interact with each other, clearing away barriers surrounding normative national currencies and exchange rates. Cryptocurrencies may revolutionize digital trade markets by creating a free-flowing trading system without fees,” says in an analysis of Cryptocurrency by Peter Devires published in the University of Houston- Downtown.

Digital assets trading can offer low trading fees compared to traditional ones. It also provides liquidity and global access to traders, which can be extremely helpful in dire economic times. When trading any asset including digital assets, having proper trading strategies are crucial to the growth of an investment. 

Long-term trading strategy: Buy-and-Hold

Buy-and-hold is a common tactic to keep an asset until it generates value in the long term. As a novice investor, the most common strategy in place is buying a digital asset and holding it for as long as you can, waiting for its value to appreciate. There’s no need to be watchful for frequent events that can affect the asset’s price on a daily basis. Rather, all you have to do is keep your digital asset in your digital wallet and be patient enough to potentially see the value grow.

A study published in the Journal of Economic Psychology stated “investors who take larger risks would expect higher returns. As such, investors with a higher level of risk tolerance are expected to hold assets with a significantly higher level of risk in order to obtain a higher return in the long run.”

This explains why holding can be a lucrative trading strategy yet can also be a risky move—one critical factor when holding is choosing the right asset to invest in. There are possibilities that the one you have chosen would not increase its value, thus, losing the initial capital put into the investment. It isn’t also a practical strategy when expecting quick turnovers.

“Holding onto your asset can be a great way to start a trading journey. Choosing a digital asset with a strong track record with reasonable liquidity is a common strategy to begin a long term investment,“ said Andre Gerald, Chief Executive Officer of Prance Gold Holdings, an automated arbitrage trading platform.


Short-term trading strategy: algorithmic trading

If you are seeking faster returns on your trades, you can take advantage of algorithmic trading. Unlike the buy-and-hold method that relies on the long term appreciation of an asset value, algorithmic trading in one instance relies on price differentials of the same digital asset on different exchanges. It is a trading strategy that is best performed by an automated platform since speed is a critical factor to the success rate.

“With algorithmic trading, any investor can start trading without facing too much risk, such as the delay in initiating a quick trade. Many advanced algorithmic trading uses an artificial intelligence bot that automatically executes the best trading opportunity for you without manual intervention,” Gerald added.

“The use of algorithms to place orders for trade execution on electronic exchanges is considered beneficial to investors to achieve best trade execution,” a paper by Aggarwal and Thomas published in Indira Gandhi Institute of Development Research stated.

Algorithmic trading relies on the power of automation to identify and execute profitable trade opportunities much faster than a human could. New traders would not need to do any tedious heavy lifting and instead, use the advantages of trading bots to save time and effort.  

The takeaway

The result of unemployment globally has made the population creative in finding alternative income streams. Investments as an alternative income can be viable as long as the proper strategy is used. It is also necessary to understand if long-term or short-term trading should be used to make the best during today’s economic climate.

Image(s): Shutterstock.com


The writer of this post is a guest. Opinions in the article are solely of the writer and do not reflect Null TX's view.

LEAVE A REPLY

Please enter your comment!
Please enter your name here