Why to Trade Forex During a Recession

Before reading this article, please note that trading during a recession (such as the global financial crisis of 2008) is not the same as trading during a world crisis, such as the coronavirus pandemic of 2020. To learn how to trade during a world crisis, click here. To learn about how to trade Forex during a recession, read on.

It is no secret that the recent debt crises in the PIIGS countries and the US, coupled with a crippling natural disaster in Japan, have rocked the financial markets worldwide. Millions of people across the Western world have lost their jobs, others took tremendous salary cuts, and then there are the few lucky ones who are just experiencing a slowdown in business.

As a result of this unprecedented financial crisis, many people, who were making 6 digit salaries just a few years ago, are now either unemployed or underemployed. There are millions of people out there looking for solid alternatives to unemployment and ways to supplement their incomes, and the Forex market is a solid though oft-forgotten way to augment one’s income.

The following is a short list of reasons that the Forex market is a serious and profitable way to profit fully or partially.

• Liquidity: If you take the Forex market for what it is, and implement all the various resources and tools in your trading, the potential for profitability in Forex is unparalleled. No matter how much you were making in your previous job, your salary could not compete with the Forex market that sees over 3 trillion dollars traded daily. However, do not get fooled by the numbers, Forex trading needs to be viewed as a career, not a magical solution that will bring you riches immediately. If you take it seriously, you can truly achieve financial freedom in a way you could not before.
• Flexibility: If you were one of the unfortunate many who has lost their jobs, now is the time to make the best of it. Forget the traditional idea of working in a cubicle or office, trading Forex allows you the flexibility of making money all the time at any time and any place. You can trade from home, you can trade from a friend's home, and you can even trade from your mobile phone. Just like its potential for profit is endless, so are the options of where and when you can actually trade Forex. Alternatively, the flexibility of trading Forex allows you to trade around your job hunting schedule, if you are currently looking for employment.
• Availability: You know you have certain skills, unfortunately, in a recession, those skills might not be fulfilling their potential. Companies have hiring freezes and many people who have spent years looking for a job have not succeeded. The Forex market provides a perfect opportunity to implement those skills and make money doing it. If you are a technical person for example, you can take advantage of that trait and use technical analysis to analyze the Forex market. If you are better with analytical thoughts and worse with numbers, you can put those skills into action by using fundamental analysis to maximize your Forex profits. Whatever the case may be, in a time in which your skills are not appreciated by the big companies out there, you need to stop depending on others and put them to use in Forex trading.

Though the current economic situation is undoubtedly scary, you may be able to turn this fear into profits by placing intelligent Forex trades. 

Forex During Recession FAQs

Is Forex affected by recession?

Forex, unless stocks and commodities, is usually relatively unaffected by recessions. The exchange rate of a nation’s currency typically is influenced more by its central bank’s monetary policy and the demands of international trade than falls in GDP or rises in unemployment data. However, a central bank may try to weaken its currency during a recession to aid economic recovery.

What happens to currencies during a recession?

Currencies are typically impacted little by a recession unless the central bank decides to pursue a policy of weakening the currency to aid economic recovery from a recession. When a central bank wants to weaken its currency, it is usually successful, as all it has to do is create more supply.

Does the dollar weaken in a recession?

Since the U.S. Dollar was allowed to float freely in the early 1970s, it has not shown a statistical tendency to either weaken or strengthen in a recession.

Is it good to invest during a recession?

Recessions are often an excellent time to invest as stocks tend to fall and bottom out before rising as the subsequent economic recovery gets underway. The hard part of investing during a recession is catching the bullish turn at the bottom of the market.

Sara Patterson
Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.