The Russian ruble has rebounded from its steep initial losses following the country's invasion of Ukraine in February.
Below is the daily timeframe.
I have highlighted the 85% decline in the ruble in the first week of March, followed by the 46% gain in strength through the rest of March. The ruble is now back to pre-war levels.
What does this all suggest?
From an investor perspective, never get caught up in the volatility, which is a surefire way to significant losses. Exotic currencies carry far more risk than the major pairs, as they are often geopolitically driven. It is advisable to avoid these currencies altogether or trade with minimal risk and an intelligent, pre-thought out exit management system.
From a fundamental perspective, the reversal in the strength of the ruble could be a sign that capital controls introduced by the Russian central bank are likely easing pressure on the Russian currency, with officials seeking to counter the impact of crippling international sanctions.
Capital controls aim to keep U.S. dollars in the country to restrict rubles from being converted into dollars. The result of this is that the ruble cannot be sold and it is a way of stabilizing the currency from being dumped based on intense selling pressure.
As a trend follower who uses technical analysis on the larger timeframes (monthly, weekly and daily) to make my investment decisions, I would steer well clear of this kind of chart. The forex market has been notoriously difficult to trade over recent years, with this being an example.
For the day trader, this will offer the thrill of chasing money but will regularly end in disappointment, wasted capital and time. Try and sustain this approach over a prolonged time period, and it will result in burnout.
Always stay true to the principles of sound investing, which are:
- To think long-term
- Establish high-probability assets through a simple and proven analysis process
- Protect your initial capital through robust risk and exit management techniques
- Let the profit come to you by allowing winners to run
- Compound to accelerate the profit phase.
It is essential to stay informed about world events, but it is equally important to know when to break away from the news and the noise and invest with the odds very much in your favur.
Probabilities, not certainties!
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