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Geopolitical Crisis — Good for Traders or a Headache?

March 17, 2014 (Last updated on August 20, 2017) by

Although the current situation with Ukraine, Russia and West’s reaction may seem kind of unique, there were many crises in our recent history that affected the foreign exchange market similarly, making it react impulsively. Despite the real impact of such events on the world (which is usually very negative for the stock market), the news of geopolitical tensions or even conflicts create significant trading opportunities in currencies. At the same time, some foreign exchange traders may find additional market turbulence more of a nuisance than a possibility.

As an example, it can be a good idea to look at the recent situation with Ukraine. While, UAH is not a widely traded currency, USD/RUB is available with many MetaTrader brokers (e.g. EXNESS). Monday, March 3, opening resulted in a 674-pip gap compared to Friday, February 28, closing rate of 35.851. Booking such profit over the course of two days would be a nice addition to any FX trader’s bottom line.

USD/RUB - Crimea War News Reaction

One could say that the previous weekend news of Russian invasion of Crimea came out as a complete surprise, and that USD/RUB gap could have easily break a lot of short trades. The trick here (and with some other situations) is that a watchful trader could notice reports of Russian troops operating outside of their regular locations in Crimea as early as Friday, February 28.

Obviously, it was impossible to predict the exact outcome and market’s reaction even after reading those news, but betting on a short ruble position would be a pretty logical decision if you were looking at the news and was considering trading USD/RUB at all.

Unfortunately I did not recognize this opportunity in time when it had presented itself, but I am sure that many traders (who are not afraid of trading USD/RUB) have profited from it. Did you ever profit from similar situations?

How does global geopolitical situation influence your trading?

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