Recession and the Foreign Currency Market

A key question for anyone looking at a business venture must be, “Is this business recession-proof?”

This is a key question to consider because it is a major factor in determining whether a particular venture is viable or not, both short and long term. It goes without saying that entrepreneurs want to make money whether times are good or bad. In order to do that, it's of prime importance that the venture meets the criteria of being considered 'recession-proof.'

Recession-proof industries are determined by their income elasticity and demand. In other words, can the business remain relatively stable despite the fall in discretionary income? Something we know we'll see during an economic recession. In simplified terms, where does it fall on the 'needs' versus 'wants' scale of spending?

Many factors influence the economy and can cause a recession. Some of these factors are speculation, currency crises, inflation, national debt and war. This invariably leads to unemployment, foreclosures, bankruptcies, stock market crashes, reduced sales, less lending and deflation. This is all part of the natural cycle in economics known as expansion and contraction. We continually see periods of recession, recovery and prosperity.

Throughout history this cycle has repeated itself over and over again, trying to find an equilibrium which is only ever fleetingly achieved.

Lets take a look at what factors impact the Foreign Exchange Market (Forex). Perhaps the most important factor is the economic health of any given country. Is the economy weak or strong? Is inflation out of control? Is recession looming? What is the political climate between differing countries? And let us not forget about good ol' speculation. Whether the numbers are up or down, they can and do impact the valuation and movement of currency in the Forex market.

Given this, ever so brief, few paragraphs, let us take a look at how Forex stacks up against the grim outlook of our current economic reality. There's great news here! Let's take a look at why.

Even though all the economic factors discussed above, impact the valuation and movement in the Forex market, they don't affect the ability to make money trading on the market's movement. This is because the earning potential in based on this movement. We don't care if it's up or down, we just want movement of any kind.

Does this mean we shouldn't consider other economic information? Well, no one wants to make decisions in a complete vacuum however, strictly speaking, economic information isn't really called for. There are simple, no-nonsense, purely reactive strategies, which are based solely on movement in the market. If the market doesn't produce the kind of activity you want, you simply don't trade. Preservation of capital is king.

The great thing about learning to trade in the Forex market is that education, experience and economic status don't matter. Once you've been given the right knowledge and tools, it's then up to you to develop the discipline, patience and business-minded attitude to be a successful trader.

To sum it up folks, this is a business of trading the stuff all the other international decisions are based upon - cold, hard cash. Whether the markets are up or down, money will keep moving around the world. That's a fact! What we capitalize on, is that very movement. We aren't buying or selling any tangible product, we are sailing on the coat-tails of movement. Isn't it beautiful? We are our own buyer and seller; therefore, the only customer we have to satisfy is ourselves.

Forex is a 100% recession proof business. There's activity in the forex market whatever happens. How great is that?

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