No one could foresee the seriousness of the situation and the rapid spread of coronavirus (COVID-19). What is more, no one could have imagined the impact coronavirus would have on the stock exchange. And the markets were certainly not ready for it.
In response to the European market meltdown caused by mass panic, the FCA has put a temporary ban on short-selling of Spanish and Italian stocks.
These radical measures were taken to help the European stock exchanges curb losses. To illustrate further, the benchmark stock market index of the Bolsa de Madrid fell by 14% on March 12. At the same time, the Italian stock market sank 17%.
The impact of the coronavirus outbreak goes beyond the European market.
The American investors reacted immediately after the Federal Reserve announced to cut its benchmark interest rate to near zero. As a result, US stock futures plunged around 5% last Sunday evening.
Does that mean all traders should suspend their trading activity? Of course not. Even though coronavirus has destabilised far more aspects of our lives than we originally anticipated, trading from home during quarantine can be practiced with no risk to others.
Tips On How To Trade During The Coronavirus Market Crash.
- Manage risk – this should go without saying with any trading style at any given time.
- Reduce position size – due to high volatility, make ground to provide yourself with plenty of trading opportunities that will offset minor losses.
- Reduce overnight risk – don’t fall into the “get rich overnight” mind trap. This is especially true for inexperienced traders and those with small accounts.
- Follow the news – check the latest information about coronavirus and its impact on the markets from reliable sources.
- Don’t hold trades over the weekend – news about coronavirus are released on a daily basis and major changes can happen on a weekend. Make sure you close your trades before the stock exchanges close on Friday.
- Keep a cool head – avoid Social Media hysteria at all cost. While it is important to take various views into consideration, it is very easy to be affected by panic and make classic trading mistakes.
- Don’t buy a falling knife.
One way or the other, we know that COVID-19 coronavirus pandemic is a temporary phenomenon. In China, the virus outbreak has passed its peak and the numbers of the infected are steadily declining.
It will take time for the stock markets to recover from the drastic crash. Until then, traders are advised to be patient, protect their capital and well-being.