How To Trade The Markets During Coronavirus (COVID-19)

This page is a resource for trading the financial markets during the COVID-19 global pandemic.

We’ll cover everything you, as a trader, need to know during these uncertain times, to leverage events in your favour.

What will you learn?

  • How to benefit trading during a global crisis
  • Tips on how to survive high volatility when trading
  • How to research and what to research
  • What to avoid in the financial markets, and more

Let’s get into it.

Coronavirus: A Financial Crisis In The Making?

The Coronavirus or COVID-19 is a global pandemic that has shaken the world and created huge market volatility throughout 2020.

S&P500 index coronavirus crash

With “social distancing” rules in place and full nationwide lockdowns becoming the new “norm” in many countries, this has forced a slowdown of the global economy, in-turn, prompting financial markets to crash.

Before the World Health Organization announced COVID–19 a global pandemic, many economists were looking at the threat of a worldwide recession; other economic forecasts were far more bullish on their market outlook.

What Does All of This Mean for Trading?

No matter how good your economic forecasting, it’s near impossible to “predict” unforeseen events like a global pandemic.

With market volatility at an all-time high, being a trader with skills to navigate financial markets during conditions like these can be extremely lucrative, even during a global financial crisis.

COVID-19 is the most discussed topic worldwide right now media outlets have news 24/7; all of this influences the markets, creating trading opportunities.

Google Trends COVID-19

What is COVID-19?

COVID–19 is an extremely contagious respiratory illness caused by a new virus. Symptoms include fever, coughing, a sore throat and shortness of breath.

There is no clear explanation of how this virus emerged; all we know is that the first case appeared in December 2019, in the city of Wuhan, China. It appeared to come from a local seafood market.

Google WHO COVID-19 Warning

What we do know, is the subsequent impact on the global financial markets and that traders and analysts have seen massive volatility in the market due to the coronavirus spread.

We are not just talking about the stock market, but Forex, Commodities and even the Bonds markets. COVID-19 has affected each market, asset by asset.

Let’s look in detail at how this virus has shaken each market.

Coronavirus Impact on Stock Markets

COVID-19 Impact stock markets

Impact of COVID-19 on Financial Instruments:

COVID-19 Stocks and Shares

First, let’s go over international indexes, to see how the stock markets reacted along with COVID-19.

With the start of the year 2020, after China officially claimed a few cases of coronavirus, the S&P500 price began to move downward after it reached a higher high of 3400 USD.

We can see clearly, that on 19th February 2020, the price started to drop.

The US economy slowed down since most of its production is based in China. This slowdown in output caused the drop.

Furthermore, the price broke through the 200 moving average and continue its direction sharply downward.

DAX30 Day 1, COVID-19

Another index to keep an eye on is the DAX30.

At this point, Europe is heavily affected by this virus, since Italy, Spain, and France have the highest number of deaths.

With the situation getting worse and no vaccine imminent, a significant drop displayed on DAX30.

This index reflects most European stock markets. It is evident that the DAX30 followed the same pattern as S&P500 and has dropped dramatically since mid-February.

Both the S&P 500 and the DAX30 indexes move downward, starting precisely on 19th February 2020.

A drop in the US economy leads to a decline in other smaller economies around the world.

This explains why DAX30 follows the same move as the S&P500.

SSE composite 1-day Chart

We should also see what’s happening in the financial markets in the Asia/Pacific zone where this virus appeared first.

As we look at the SSE COMPOSITE index that represents China’s economy.

We see that the drop started on 14th January 2020, almost one month ahead of the S&P500 and DAX30 drop.

This downward movement is expected, as the COVID-19 began to spread across China at the end of December/early January 2020.

S&P500 1-day chart combined

Here, we have combined three indices:

S&P500 represented by candlesticks
SSE COMPOSITE with a red chart line
DAX30 with a blue chart line
We can see how the Chinese index started to drop at the beginning of January.

The other two indices began to fall in mid-February.

It is obvious why, because the virus emerged in China first and spread to the other countries.

up to 500:1