Traders in the Asian financial markets are taking note of the wider risks in 2019 that influence their trading strategy.
Editorial
Growth across Asian economies is making the continent an exciting place for traders in 2019. But the backdrop of the US-China trade war and political upheaval have affected currency markets. For traders, navigating the Asian markets effectively means constant analysis and sometimes a change in strategy.
Controlling the risk in trading underpins strategy
The Southeast Asian market has been an active one for online trading. It includes currency speculation, stock positions, contracts for difference and the forex, but successful trading requires a deep understanding of the Asian market.
The ultimate goal for any trader is to leverage the right positions at the right time. They require insight into the factors influencing markets. Developing a plan to manage risks (and most importantly, sticking to it) is integral to traders achieving their financial goals.
A clear trading plan means asking questions of recent trades, like what price it was bought at, what price it was sold at, what were the key motivations for buying a position, and what can be learned from how it was managed? Do they have trouble buying/shorting more shares even when they are very confident that it was right? This line of questioning helps provide a profile of who they are as a trader, but more importantly, what steps to take to improve financial gains and minimise losses.
Traders define risk/reward ratios to limit losses and mode profits
Many traders will have pre-set risk/reward ratios when trading individual stocks. Every trade they make has clearly stated goals. They will be clear on how much they can expect to lose and what their potential profit could look like.
Once a trader has set their risk/reward ratio, a stop-loss order is used to automate the selling of a position once it reaches a certain limit. For instance, in the situation above where the risk/reward ratio is set, a stop-loss order can inform the broker to sell that position if the trade falls below a certain price, limiting losses but acknowledging the risk/reward ratio.
Several factors are influencing trading in Asian markets in 2019
Among the issues Asian economies face, three stand out as shaping trading strategy in 2019: the continuing US-China trade war, regional political upheaval, and the weakening dollar.
These factors have been factored into forecasts. The big five Southeast Asian economies are expected to slow down in 2019. Indonesia, Malaysia, the Philippines, Singapore, and Thailand as a group are forecasted to report 4.8% growth in 2019, slightly down from 5% in 2018.
The continuing trade war between the US and China casts a shadow over global markets. The IMF cut its global growth projection from 3.7% to 3.5%, citing the US-China trade war as one of the main reasons “risks are rising.” The dispute remains one of the chief concerns in Asian economic forecasts this year. Although most commentators believe that this trade war will end, when and with what lasting consequences is still unclear.
Upcoming elections and a weakening dollar send jitters through the markets
In Thailand and Indonesia, upcoming elections are prompting investor uncertainty. In Thailand, the prospect of a general election has already had significant repercussions. Delays to the Thai elections caused widespread uncertainty that spooked investors. Given foreign investment is a primary driver for economic growth in Thailand, any level of uncertainty would cause the markets to drop.
The US Federal Reserve’s decision not to raise interest rates as expected has caused the dollar to weaken. Amidst market volatility, the US dollar tends to be a go-to option; however, when the dollar struggles, investment goes elsewhere. This will be welcomed by ASEAN’s emerging economies that are more locked into a global economy. The dollar is the most popular currency to trade, and it will be speculated with more scrutiny in 2019.
The long-standing US dispute with China over trade brings both benefit and risk to the Asian markets as slow Chinese growth affects all Asian markets. But a weaker US dollar also brings interesting opportunities for trading, and those looking closely at their trading positions who are quick to react will find there is much to interest them in Southeast Asian markets this year.