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How will Forex Trading Change in 2021?

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Successful Forex traders or investors in the Forex market, the global decentralized market for trading currencies, have traditionally been seen to have an ability and a knowledge that enables them to predict the Forex market by analyzing a Forex trend. As we head into 2021, it has become clear that there is no formula for predicting movements in the market.

The year 2020 was a huge challenge for investors, a harsh reminder that predicting the future is a risky game. Yet the risks of FX trading can be mitigated by FX bonus offers, promotions in which a broker extends a line of credit to traders in the form of free money, trading credits, gifts, or rewards. These credits can be used for trading, but in some cases, they can also be withdrawn, subject to the broker’s terms and conditions, and can help to decide your overall capital outlay.

The challenges of 2020

In the US, the S&P 500 dropped more than one-third in March, there has been a contested US presidential election, and the spread of Covid-19 continues to increase.  None of this could have been predicted and leaves 2021 wide open to possibilities.  Yet, whilst 2020 was a challenge in many ways, the market registered a growth of 60 percent after March, the fastest fall and recovery in history, while central bank balance sheets and fiscal deficits grew at a pace never seen before.

Predictions for 2021

Forex trading is likely to see many changes that will impact in 2021. Here are some predictions that act as a warning against the potential misallocation of risk by investors. It is about what is possible, even if not probable, though relevant due to the pandemic which will undoubtedly spring surprises.

President-elect Joe Biden

The Biden administration is due to begin on 20 January. Whilst his administration plans to raise taxes on the rich, with the potential to impact stocks, the market reacted well on the night of Biden’s apparent victory and continued to rally as the election results became clearer after some dispute.

Covid-19 vaccines

In December 2020, Covid-19 vaccines started being distributed and this will be closely monitored, particularly in the first half of 2021.  A gradual return to normalcy is expected, with Congress expected to provide help to small businesses and consumers until vaccines slow the spread of the virus. Significant macro-economic impacts will hit the entire investment sector if there are speedy results.

Boost to pharmaceutical stocks

Public companies involved in the Covid-19 vaccine efforts will be well rewarded. These include Pfizer (PFE) and Moderna (MRNA), but also those companies involved in the logistics of moving the vaccines at well-below-freezing transport.

Demand for travel stocks

Once the pandemic is under control and restrictions on movement are lifted, there will be a great demand for travel, which will help all those in the industry, including airline stocks, hotels and cruise lines which could add between 1 and 1.25 percent to the US GDP.

Demand for restaurant stocks

On the day Pfizer announced its vaccine had 90% efficacy in Phase 3 trials, chain restaurants covering almost every cuisine, rallied. Cracker Barrel, Cheesecake Factory and Denny’s all saw double-digit percent gains that day.

Work from home stocks

Those that benefited from the need for people to work from home, like Zoom, will see the massive gains in 2020 likely fall as fast in 2021 as people return to the workplace. When Pfizer announced its effective vaccine, Zoom lost nearly 20 percent at one point. Food delivery services may also be impacted.

Stock rotation

New investing phases are normal, and it is likely investors will move into different sectors in 2021, with a predicted slowdown in tech stocks that had a long bull market in 2020. This is made more likely by the antitrust litigation against Google and other tech giants.

Be prepared for the unexpected

Investors should be prepared for another year of volatility in 2021. Investors should have enough savings in case of another pandemic and adjust investment strategies so that any panic selling over the past year is not repeated.

2021 is likely to see long-term investments with a low-cost diversified portfolio able to weather whatever the market brings, moving away from hot stocks, sectors or investment trends that stretch far into the future.

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