Amidst a global pandemic, many forex brokers and investors are thinking exactly the same thing: $$$. There has never been a better time to invest in foreign exchange trading since the currency market is so highly sensitive to global events, right? Actually, according to behavioral finance expert John Forlines III, it’s times like these where vulnerable investors make their biggest mistakes. We call it “availability bias”, and it refers to the human tendency to overvalue the importance of recent events, which can often lead investors to chase quick success at the expense of their long-term strategy. The truth is that while there are certainly opportunities to successfully trade while the forex markets are experiencing huge levels of volatility, one must certainly weigh up the risks before sacrificing one’s long-term strategy for a potential gain during a time of global economic uncertainty.

Here are some realities that forex traders and investors should consider during a global crisis like a pandemic:

1. Leveraging risks: Forex trading usually requires a small initial investment that we call a margin, which allows investors to gain access to substantial trades in foreign currencies. However, price fluctuations can result in a “margin call” where the investor is forced to cough up an additional margin. During particularly volatile market conditions, like a global pandemic, aggressive use of leverage will result in substantial losses in excess of initial investments. Adjusting leverage to account for the wider movement of market prices is therefore something traders should consider. As such, it is imperative to learn how to trade forex.

2. Investors should fiercely monitor monetary and fiscal policy responses from governments and central banks during times of global crisis. These can have huge detrimental if not significant impacts on currency trading, for obvious reasons.

3. Don’t forget that while it seems the world has come to a grinding halt, with nothing else of importance happening aside from the pandemic, life indeed is continuing elsewhere. While paying attention to the pandemic, keep an eye on trade wars, what is happening with oil, emerging markets and other economic factors at play around the world.

4. Never forget: if you think you’re going to get rich quick by betting on one currency coming out on top at the end of all this, you’re not the only one. The current COVID-19 pandemic is fueling a colossal surge in currency trading by retail investors, who are not only convinced they know which currently will yield the most value in a post-COVID society but who are also discovering that working from home means they can participate in the market during the daytime.

5. No one knows how long a crisis like a pandemic will take to end, and therefore it’s difficult to anticipate how long to wait for things to play out. During Covid-19, traders are pretty much trekking unknown territory, and the news is hurling out information (and misinformation) to us 24/7. For many traders it is almost impossible to monitor the news and media reports concerning Covid-19 on an hour-to-hour basis, and keep track of the situation. As a result, many traders are opting to liquidate positions before the close of trade each day, in case things return to normal quicker than anticipated.