It’s October: should we be afraid?
- ‘October effect’ sees many traders fretting about this month
- October 1987 saw the Dow drop by 22.6% in 1 day (Black Monday)
- October in fact no different for traders than any other month (easyMarkets)
- dealCancellation provides actual and psychological way to beat the October effect
October has something of a bad reputation in financial circles. The Panic of 1907, the Crash of 1929 and Black Monday in 1987, when the Dow plunged by 22.6% in just one day, all took place in October. These events have left investors with a sense of caution when the prospect of taking risks this month comes up.
Nikolas Xenofontos, Director of Risk Management at pioneering forex and CFD broker easyMarkets, explains,
“In reality, trading in October is no more or less risky than trading in any other month. Market crashes can happen at any point during the year – the key is to keep a close eye on global events and upcoming reports that could impact on market movements during the course of the month. It’s a sound approach, whatever the month may be.”
The ‘October effect’ is actually not borne out by statistics, but its psychological impact is nonetheless very real. The fear of what the market may do is enough to give many traders pause. And this October there’s certainly plenty going on around the world that could have an effect on global markets.
On 3 October 2016 a deluge of manufacturing PMI reports will be released by the US and Europe, along with the TD Securities Inflation report in Australia. Australia’s Reserve Bank will release its latest interest rate statement the following day.
On October 5 the European Central Bank will release its Monetary Policy Meeting Accounts and two days later the US nonfarm payrolls report in the US will be influential in the Federal Reserve’s deliberations over whether to raise interest rates before the end of the year.
By mid-month the focus will be on China, with an influential trade report on 13 October followed by reports on producer and consumer inflation the following day. Industrial production figures from the US and Japan on 17 October, UK and US inflation data on 18 October and China’s Q3 GDP figures on 19 October may also serve to impact on markets around the world.
As October winds down, Australian employment figures, the policy meeting of the European Central Bank, US manufacturing PMI and UK and US Q3 GDP data all have the potential to create ripples in the markets, keeping investors on their toes. The general winding up towards the US presidential election on 8 November 2016 could also be an influential factor.
So are traders right to be nervous of October? easyMarkets’ Nikolas Xenofontos thinks not.
“October really is no different for trading than any other month – apart from having a rather underserved reputation,” he comments. “Although for those who remain uneasy our dealCancellation service provides the ideal way to undo a losing trade within 60 minutes – so there’s some peace of mind for those suffering from fear of the October effect!”
For further details visit www.easymarkets.com, email pr@easymarkets.com or call +44 203 1500 748.
Risk warning: Forward Rate Agreements, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you understand fully the risks involved and do not invest money you cannot afford to lose. Our group of companies through its subsidiaries is licensed by the Cyprus Securities & Exchange Commission (Easy Forex Trading Ltd- CySEC, License Number 079/07), which has been passported in the European Union through the MiFID Directive and in Australia by ASIC (Easy Markets Pty Ltd -AFS license No. 246566).