What do you think will be the impact of the upcoming US elections on the financial markets?
I think the major impact will be more volatility this year. Over the last two or three years, we've experienced lower volatility, but generally, traders tend to favor Trump. I anticipate much more volatility and deeper moves in certain markets like gold, commodities, and the stock market in general, as well as specific sectors within the stock market.
What role do these political events play in the financial market? Is it mainly uncertainty?
Uncertainty has two sides. On one hand, it can be negative, but it also increases market volatility. This volatility usually creates many opportunities to seize. So, this presidential election and the uncertainty it brings could lead to more opportunities in the market. Additionally, some markets that have been stable may become volatile again.
How do prop trading firms react to events like the US elections?
For a prop firm, dealing with such significant events presents a big challenge. Increased volatility means asset classes may move in different directions, making risk management more complex. However, we are accustomed to managing such situations. Over the years, we have navigated many volatile events, so we know how to handle it. This means we become more cautious regarding risk.
For certain asset classes, we may increase margin requirements, meaning traders can open fewer positions than usual. Our goal is to get through this volatile period with minimal harm to the company and the traders.
What is the benefit of trading during the US elections with prop trading firms versus trading with your own capital?
That's a great question. It all comes down to risk. The advantage of trading with prop firms like ours is that we operate in a risk-controlled environment. Traders have minimal risk, aside from the cost of the challenges they buy. We manage all the risks. If someone incurs significant losses, it is effectively our loss to manage.
In contrast, if a trader uses their own money and does not have proper risk management or experience trading during high-volatility periods, they could face substantial losses, which is not the case with us.
Why should prop traders choose The Trading Pit over other brands?
We are very different from others. First, we offer multiple platforms, not just one. We provide a variety of instruments, including cryptocurrencies, and importantly, we have real futures.
During the US presidential elections, real futures become critical because the FXEFT market is over-the-counter (OTC) and often loses liquidity during high volatility. In contrast, futures markets are among the most liquid in the world. For instance, trading S&P 500 futures or gold futures typically ensures liquidity, which is a significant differentiating factor between us and many other prop firms.
What strategies do you think prop traders should follow during periods of high volatility?
The best strategy would likely be to revise all existing strategies, as volatility dynamics will change in the weeks leading up to and following the presidential elections. Implementing stop losses and attempting to capture shorter moves may complicate risk management.
I recommend focusing on specific asset classes, as it can be challenging to trade multiple markets simultaneously in high volatility. It's essential to select markets that the trader is most familiar with, maintain smaller trade sizes, and be cautious overall.
Share your experience from the previous elections. How did the market behave then?
During Trump's presidency, markets were very volatile. He is known for his controversial statements, which moved the markets significantly and created many opportunities. For instance, there were notable movements related to the China trade war and his direct stance on Russia, which led to various trading opportunities in stock indices and commodities like gold.
Conversely, with Biden, and likely with Harris as well, we might see a more stable and predictable market, which could limit opportunities compared to Trump’s presidency.
In terms of financial impact, could you highlight the key differences between Kamala Harris and Donald Trump?
If Kamala Harris wins, we can expect a continuation of Biden's policies. The market impact would likely be minimal, with a possible relief rally in the stock market and a drop in gold due to decreased instability. Foreign policy will probably remain consistent, leading to stability and predictability in economic policy.
In contrast, if Trump wins, there will be greater uncertainty and instability in the market. However, this uncertainty may have a positive impact on the US stock market because Trump is pro-business and favors deregulation, which can benefit businesses.
Is uncertainty good for prop traders?
Yes, I believe there will be more opportunities for prop traders if Trump wins. For those involved in swing trading or longer-term trading, a Harris victory might offer similar opportunities but with less risk, allowing for larger positions. With Trump, risk management becomes much more critical.
How do you think the US elections will affect European markets?
European markets generally follow US markets. I anticipate that Trump’s election would bring some uncertainty in the initial months. However, with Kamala Harris, I don’t foresee much impact on European markets; they will likely continue their activities without being overly influenced by US policies.
That said, with Trump, we could see increased uncertainty in certain sectors, such as defense, pharmaceuticals, and technology in European markets, but no major overall impact.
Will you change your trading strategy now that the elections are approaching?
Personally, I tend to trade less during presidential elections, not just this one but generally. The daily news and events make it difficult to track everything. I plan to be more defensive regarding volatility and will likely focus on the gold market, which I enjoy trading. Gold tends to present numerous opportunities, and it remains a very liquid market, allowing for easier exits even with larger positions.
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