Crisis and problems of speculators. Changing trading conditions

Trading in times of crisis many investors equate with "the opportunity of a lifetime". After all, huge, over-normative volatility is a chance for quick earnings (but also losses). It is also an opportunity to make long-term purchases at "discount". But there are also problems, for example in the form of changing trade conditions. We observe such situations on the commodity and equity markets.

Be sure to read: High volatility is a trader's friend. Trading during the crisis

Gold - liquidity problems

Gold perceived as a safe investment for hard times, so far it is playing a small "trick" on speculators. In March, the price dropped more than 14% from the peak and then turned 12% up. This means that if someone had the idea of ​​shifting savings into this metal at the time of the escalation of the pandemic in Europe, they are still at a loss. But this is not the end of the surprises.

The liquidity problems have only started recently. Yesterday, many brokers sent out information to their clients about difficult trading conditions on XAU / USD. This can result in a much higher spread, problems with order execution or with above-average price slippage. The effects can even be seen in the chart, where the ticks are less regular and the whole series of candles has "suspicious" shadows.

Chart gold, M15 interval. Source: xNUMX XTB xStation

Brokers do not provide exact information for this state of affairs - perhaps this is due to the withdrawal of selected liquidity providers from the transaction and / or disruptions in gold mining caused by the coronavirus. Some mines in Africa, e.g. in South Africa, mining palladium and platinum, Czy in Congo, from where cobalt is extracted for battery production. It is highly likely that gold mines may also feel similar problems approaching.

Prohibition of short selling

Restrictions on short selling have been imposed in recent days by selected exchanges - Italian, French and Spanish, i.e. in countries where the situation related to the coronavirus, to put it mildly, is not the best. And this will certainly have an impact on the local economy. Is this the right solution that will help "save" indices from deepening declines? To some extent, for sure, but there is no shortage of "bearish voices" pointing to the injustice of these actions. After all, has anyone ever banned long positions ...? 🙂

Leverage reduction

In the case of European brokers, where ESMA regulations have permanently limited the amount of leverage, there is no such problem for retail traders. The problem occurs with brokers from outside the EU or people who have the status of a professional or experienced client. Some Forex brokers actually reported overnight cutting the leverage for selected groups of instruments for an indefinite period to levels similar to those of "gray retailers". Until when? It is not really known, because even if our broker indicates the expiry date of the restrictions, it can ultimately extend it indefinitely if the market situation is still uncertain.

Are there any surprises waiting for us? It all depends on the uncertainty, which, depending on market reports, may still shoot up. Meanwhile, on the VIX fear index we have been observing a clear calming of moods in recent days (even though we are still at 2011 levels).

VOLX chart (CFD on VIX), interval D1. Source: xNUMX XTB xStation