Not many things make my blood boil, but this week's been a monumental exception.
We've seen:
~ Oil crash below the $50
~ Commodity prices continue to make new lows
~ The dollar keeps getting stronger and stronger
~ Greece has accepted a bailout after they had a referendum to vote against any government interference!
By now I probably sound like a broken recorder, because there is nothing new in that list I haven't told you about before.
However, just as it looked as if things couldn't get any worse, they just did.
One currency has just been devalued AGAIN. And it's lead to our equity market crumbling down for the week!
In fact, many companies crashed over 3% on Tuesday alone. And that's when we thought the recovery was on its way.
Well think again, because right now people hate this currency…
The China’s Yuan is sending negative shock waves throughout the world!
There seems to be major concerns about the economic health in Beijing. China decided to devalue the yuan renminbi by 2% on Tuesday.
This is the the biggest devaluation under the currency regime since it started in 1994.
Here’s the thing. You know how just about anything you buy says it is “Made in China”?
Well, what you see and what is actually going on, is sometimes just an illusion.
Let’s talk a bit about China’s expansion rate to see what’s going on.
In 2014, the economy expanded at a rate of 7.4%. This is the slowest level in decades. And according to official data, it looks like they’ll log 7% growth this year.
China’s exports dropped 8.3% last month. And the people at the Bank of China says the strong yuan is putting a lot of pressure on exports. So it’s evident the overall growth in China’s economic situation has been sluggish. So theoretically, the devaluation in the yuan could actually help China’s recovery and help boost growth.
In the midst of all this turmoil, what can we do?
Well when it comes to trading, we have a saying.
“Even being neutral is a position.”
And when you’re neutral, you do one thing…
Nothing.
This is the time when you should just let the financial storm calm down before you do anything. Right now you should rather sit, observe and evaluate your portfolio and your trades.
But I'm not telling you to close any of your trades. But if you do have any open ones currently, make sure that your stop losses are in place. This is in case we have another unprecedented market strike.
And if you don’t have anything invested, then maybe look at markets that are not prone to fall 3% to 5% in a day.
For example, you can look at how the major currency pairs are doing in the Forex market.
By major currency pairs, I mean the euro, US dollar, rand, yen and the Great British pound.
Whatever you do, please think with a rational and logical point of mind. Don’t think about what money you can make but rather what you can lose.
This way you'll always think about the realities of growing your portfolio rather than the fantasies.
“Wisdom yields Wealth”
Timon Rossolimos
Senior Editor: Trading Tips
Head Analyst: Red Hot Storm Trader
Author: 94 Top Trading Lessons of All Time
Part three is coming up next week, so if you haven't watched part two, you don't have much time
The Eurozone Debt Crisis: The next stock market crash (Part 2 of 3)
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