Using a Strong U.S. Dollar in Uncertain Times

It seems like the major financial markets are beginning to see a little extra consumer confidence emerging. Within the U.S. stock market, for example, volatility dropped a bit for the week ending October 16th, and with it, major indices like the S&P 500 went up in price. And while this is certainly encouraging news for traders and investors alike, it’s hard to say whether or not this confidence will last for long.

Much of the recent volatility in the U.S economy has been taking shape because of the Federal Reserve. Now that a decision has been seemingly been postponed, prices are making gains. They are not near where they could be, but it’s a step in the right direction. This will come back into play in the near future, but until then, things are kind of on hold.

One additional thing to consider is the fact that there are several big events coming up that are likely to shake up consumer confidence and once again increase volatility. The Chinese third quarter data for GDP is coming up, as are ECB and BoC rate change decisions. Bad news from any of these quarters will likely derail gains that have been made and make a bear market all the more likely.

These things bring up a very important question: how should we act as traders?

First, we need to evaluate each asset individually. That means looking at available fundamental indicators to get a feel for what we can expect, and then create the appropriate technical evaluators and indicators to know what market action looks like. With this information, we can create a short term strategy that will be profitable over the long term. The fundamental indicators look at the asset’s overall health and the technical indicators help us to create solid entry and exit points for each trade. You can use this general method with any type of trading, including traditional stocks, options, binary options, or any sort of futures contract that might be available. It can be used with stocks, currency pairs, commodities, or indices, if desired.

All of the background information bubbling just underneath market conditions is creating more uncertainty. You can profit off of uncertainty with a good understanding of technical indicators. This is particularly true of the U.S. dollar. The dollar is interesting because it moves out of step with the rest of the U.S. economy, which is a challenge for many traders. But, the dollar is often one of the easier assets to trade simply because it reacts to international events so predictably. Using your technical knowledge here will be a big strength over the coming weeks and for many traders should be the sole focus. Right now, fundamentals for the USD are strong, and the Fed has the upper hand over other major central banks when it comes to timing. This leads to a long term bull outlook for the dollar, and using this info to time your entry points will give you an advantage over other traders. Just be sure to use the right form of trading for your purposes. The traditional Forex market is a good way to make money, but if leverage is out of the question, then binary options are a far better choice unless you want to ramp up the level of risk you will be facing. It’s your choice, so educate yourself and decide which will be more advantageous.

The goal is to make money while minimizing your chances of losing money. When a market is unpredictable like we see now, we need to find stability. The dollar provides this, but only if you do it in a smart way. Short term trading is most beneficial here, but only if you can master your entries with the right technical tools.