How The Russian War Is Affecting Forex Trading

How The Russian War Is Affecting Forex Trading

Russia invaded Ukraine without provocation on 20 February 2014. This resulted in the annexation of Crimea. Russia continued to back separatist fighter

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Russia invaded Ukraine without provocation on 20 February 2014. This resulted in the annexation of Crimea. Russia continued to back separatist fighters of the Donetsk People’s Republic causing large amounts of internal strife and ultimately loss of life.

On 24 February 2022 Russia elevated the conflict and directly invaded Ukraine, under the pretext of freeing it from Nazi leaders. The western world reacted unanimously and applied sanctions on Russia and many prominent Russian businesspeople.

The Inevitable Crash

Understandably, the sanctions caused the Russian economy to contract and the value of the ruble to collapse. The uncertainty of the war and its effect on various companies caused concern in economic markets and many share prices fell.

While the effects are not comparable with the 2008 global financial crisis, it is certain that many people lost funds during this period.

Yet, Forex trading is gaining in popularity.

The Rise Of Reputable Brokerages

To help understand how the Russian war is affecting Forex trading it is worth noting that there has been a dramatic increase in brokerages.

This increase has allowed more people access to trading in Forex. But, because the brokerages are working hard to be reputable and above board, people have more confidence in them. That’s the real reason more people are trying trading in Forex.

Of course, the fact that it’s easy to get started helps.

Increase In Multicurrency Accounts

Forex trading involves monitoring currencies and trading according to whether you think the currency will move up or down. In recent years many Forex traders have realized this is easier with multicurrency accounts, it’s even beneficial to people with second homes abroad.

The beauty of multicurrency accounts is that you can receive, hold, and spend in any currency you wish. That may seem strange when trading in Forex as you’re trading on the currency. However, astute traders are realizing that additional profits are possible when you receive funds in one currency and settle accounts in another.  Of course, it can also be easier to purchase the right trade as you have the correct currency already.

It’s simple but effective.

Russian Opportunities

The conventional stock market often reacts to global news by dropping share prices. That means investors lose money as they generate funds on the back of rising prices.

However, Forex trading allows you to generate returns when currencies lose ground or gain it. You simply have to know which direction the currency is about to move in.

As the ruble collapsed it was safe to assume this would continue and Forex traders could generate returns. But, as the Russian government stepped in to help protect their economy, there was a bounce-back in currency values.

In both instances investors could make a good return, the trick is to know which direction the ruble was moving in.

Admittedly that is the difficult part. However, the fact that anyone can trade means that it’s possible for anyone to generate healthy returns.

Ongoing Concerns

There is no doubt that war is undesirable. However, as a Forex trader, new opportunities arise every day, thanks to the Russian invasion of Ukraine.

For example, Russia is desperately trying to shore up its economy and the ruble. To help with this they are demanding payment of gas in rubles. If the gamble works the value of the ruble increases. If it doesn’t Russia could lose a significant amount of money as contracts are cancelled.

The value of the ruble will collapse further. There will also be knock-on effects as countries need to source gas from elsewhere and this can have an effect on both stock and Forex markets.

In short, the Russian-Ukraine war is generating opportunities for traders to take advantage of.  The trick for anyone trading in Forex is to figure out what decisions will be made and which way the currency will move.