As the US presidential election officially begins today, forex market may fluctuate wildly.
In this article, I will share with you my recommendations for trading the unpredictable environment during the elections that I use successfully till 2016th.
We will discuss the real impact of US elections and the best strategy to trade them.
High Volatility
With a constant flow of news, announcements and promises, Forex market may become extremely volatile.
During the election period, we tend seeing a lot of irrationals short-term movements.
Look at the EURUSD chart above. ATR is a classic technical indicator that measures the market volatility. As the US presidential elections started the 3rd of November 2020, we saw a rapid spike of volatility.
Safety First
In such a wild sentiment, I recommend lowering the risk per every trade that you take.
If you are risking 1% of your trading account per trade in normal times, during the election period make it half percent per trade.
False Confirmations
With the growing uncertainty among the results of the elections, mid-term and long-term predictions based on technical analysis may fail and you may see a lot of false signals.
For that reason, during the elections, I recommend do not swing trading and concentrate more on day trading and scalping.
Above it a breakout of a key daily resistance that occurred on GOLD XAUUSD after the start of US elections in 2020. You can see that it was a false bullish signal and for swing traders it could be a massive trap.
Price Gaps
During the election period, we may see high impact news, early results and rumors being released on the weekend.
It may make the forex and other markets open with huge gaps.
That is a huge gap down opening on USDJPY that formed before the start of US elections in 2024.
Don't Buy Promises
I was asked by followers where Gold will go if Trump or Harris wins.
What matters is the real actions of the elected president, not its person.
Many politicians have a track record of failing to deliver on campaign promises.
For example, the statement of Trump that he will bring back bitcoin mining to the United Stated and will endorse crypto market sounds very encouraging for crypto market.
But there is no guarantee at all that he will do it.
For that reason, I strictly recommend buying only real actions, not just the words.
Black Swans
Elections are also a period of black swans.
The impactful events that have a very low chance of occurrence.
The storm of Capitol Hill the 6th of Junuary 2021st is the example of a Black Swan Event that made may Forex pairs, like EURUSD very volatile in that day.
Similar unpredictable events have a high chance of occurrence ahead, during and after the election days.
If you just started trading, it would be better to not trade at all and to just watch how the markets react to certain events. It will help you to build a good strategy for trading the next presidential elections.
Control your risks and be careful.
I hope that my trading recommendations will help you to make more rational decisions during the US elections.
