Exclusive Interview

How to Navigate a Crisis and Weighing the Potential of Forex

Posted on Thursday, 23 Apr, 2020 / 1:37 by Scandinavian Capital Markets


Arif Alexander Ahmad explains what sets Scandinavian Capital Markets apart in the industry.

Arif Alexander Ahmad, Partner and Co-Founder of Scandinavian Capital Markets

Scandinavian Capital Markets is a Forex firm based in Stockholm, Sweden. They differentiate themselves by emphasizing the Swedish heritage in business practices and oversight, as well as a strong commitment to personalized service in a world of dispassionate brokerages.

Its leadership has years of experience and a vision of personalization that’s “all about the trader.”

Today we sit down with Arif Alexander Ahmad, Partner and Co-Founder of Scandinavian Capital Markets, to learn more about what sets them apart in the industry and how to find success during this pandemic.

Arif, thanks for taking the time! I know you’re staying busy.

Happy to! We’re working to keep the pace in this ever-changing market due to covid-19 . That’s certainly kept us running around.

There’s so much going on in the world at the moment. It’s hard for people to see the light at the end of the tunnel. What could the future hold as far as a recession and do you think this will fundamentally change trading going forward?

We can’t really tell what correct economic terms to apply until the data gets settled out, which could take weeks or months if there are significant revisions.

Honestly, what we call it isn’t as important as what it means for all of us.

None of us have experienced anything close to this in our lifetimes. As a global society, we’re trying to balance dragging down our economies with saving lives.

It’s an argument that, until now, only existed in philosophy textbooks. And yet, government leaders around the world are doing exactly that. They’re continually balancing privacy against community safety.

However, if you look at the longer history of the world, I’m talking thousands of years, we always build back starting with the same fundamental pillars.

One of those has always been global commerce which inevitably leads to Foreign exchange.

So why is Forex so “essential” to the economy at large? Will this continue?

Well, for any part of the global economy to operate, currency exchange needs to happen. It’s the lubricant that makes international commerce possible. Otherwise, we’re back to the age of bartering.

As long as there has been international trade between nations, there’s been a need for currency exchanges.

Despite the rising popularity of digital options, our global economy relies almost exclusively on the foreign exchange system.

When you think about the country you live in, consider the products you find around you. How much of the components or materials come from local sources vs abroad?

Some geographies hold exclusive rights to a particular commodity. For example, lithium-ion batteries are becoming a huge product in our lives.

Yet, lithium mines aren’t found everywhere. Without Foreign Exchange, how would France or the United Kingdom acquire these products.

Simply put, there will always be a base need for international commerce which inevitably drives Foreign exchange.

But is there a downside even in Forex? There have been disruptions.

Indeed there has been major volatility as of late. But there’s still a two-sided trade rather than the one-sided nature of equities at this time.

Stocks go up or down in normal circumstances, but they are all heading lower in this market. It is difficult for investors to be profitable when stock markets are going down.

In Foreign Exchange, currency pairs fluctuate and bounce around but traders still have some semblance of give and take. Increased volatility has been the biggest change to Foreign Exchange.

Traders also find ways to adapt under these conditions. Some of the best ones we work with aren’t so narrow in their focus they can’t see what’s going on.

They assess the context and change their risk and other parameters to optimally handle this environment.

Both investors and brokers enjoy volatility, but is there such a thing as too much? Is Scandinavian Capital Markets prepared for such high volatility?

Volatility is a natural component of the market that expands and contracts regularly. Successful traders and investors inherently understand this.

They don’t plan for it every day necessarily. However, they accept and prepare for it as part of their overall strategy.

We are seeing bigger price swings now, and that means more potential profits on a daily basis, but also more risk if you’re not careful.

We’re in a great position with what we do at Scandinavian Capital Markets because of the platforms, liquidity, and other resources, and especially the one-on-one attention we offer to our clients.

This should be an exciting time for our clients, and that’s what we try to get across to them.

I’m especially proud of the way we operate as an STP broker. Along with my partner Michael Buchbinder’s expertise in trading technology, we frequently reassess our and our clients’ exposure.

These times are unprecedented, but they are far from unmanageable.

So it sounds like now might be a great time to start?

There’s a lot of great outcomes even now, and more people are jumping in. For example, there has been a particular uptick in c-level clients getting into foreign exchange, which is terrific.

Even if they may be getting into it out of dire necessity, they know they can participate either to deliver basic income or put themselves in a better position going forward.

In fact, there’s a fair amount of spread bettors that are transitioning into the Forex trading world. With lots of people stuck at home, many of these individuals are finding the spread world unreliable at best.

As stock markets get decimated globally, they’re looking for ways to still remain active yet find more consistent opportunities.

I think we will see working from home as part of the new normal, and what we do in particular certainly works with that mindset.

As people look to subsidize their wages, they will need to add additional ways to earn money. More and more, they are increasingly coming to FX as a way to do that.

In what ways will 2020 change the financial services industry forever?

We’re witnessing events that haven’t existed in over a century. Equity markets have been roiled by uncertainty. Excess liquidity driven by central banks has exacerbated some unwinding of positions.

They’ve stepped back in to ensure the stability of the financial markets. Yet, without a clear end in sight for the pandemic, no one can say where this ends and what it looks like,

One place that’s been particularly challenged is the CFD market. Similar to equities, they’ve experienced unprecedented volatility.

This doesn’t even mention oil, which is another massive cause for concern, or the meteoric rise in gold prices.

Because of the range of returns and uncertainty, people are looking for other asset classes to trade now more than ever. I believe this trend will continue beyond the current environment.

People will be more aware of the volatility in the market and trade accordingly. Nothing is a “sure thing”, but Forex will still be there, people will still be trading currency.

What about physical assets like Gold? Is it still more of a “sure thing” as circumstances continue to degrade?

These are definitely the conditions where gold should be acting as a hedge against stocks. However, what I’m seeing is that there’s an issue with the physical availability which is massively affecting the margins.

The problem isn’t the demand for the physical metal, but the forced paper liquidation of gold due to the pandemic. We’re seeing mature contracts cashing in, which must be tangibly backed.

But with the supply chain disrupted and refineries closing their doors, there’s not enough there.

Costs have gone from essentially nothing to close to a $7 premium to trade. We see traders holding the transactions have stalled.

Will a Forex trader be in a better position when the dust settles?

A lot of that remains to be seen. There’s certainly more stability in the Foreign exchange markets at the moment. However, the longer uncertainty reigns, the greater the possibilities for disruption.

We’ll certainly see pressure on brokers that can’t keep up with their clients or fail to hedge appropriately. That’s the nature of the business that weeds out many, and why we’re confident in our continued success.

I think one thing to remember is that Forex traders tend to look at things more broadly than equity traders.

They don’t just look out in fear at the next 30 days. Instead, most of them look at these markets as one of the many building blocks in their wealth generation.

When you really get into Forex trading, it isn’t something you sit down and do for two months and make a lifetime’s fortune. It takes practice and patience over the course of years.

What makes Scandinavian Capital Markets better suited to deal with growing challenges and client needs in this new normal relative to competitors in the industry?

I really believe it’s about transparency and fairness, especially now. In light of the crisis, we’re seeing forms of regulation being imposed on currency trading.

Scandinavian Capital Markets has already been authorized and registered with the Swedish Financial Supervisory Authority (FSA), which oversees one of the most reputable and stable financial trading markets in the world.

We’ve laid the groundwork ethically as we offer resources, competitive results, and a strong network of support to our traders.

As I noted before, when the dust settles, I think you’ll have a lot of brokerages that no longer exist due to the way they manage risk.

It’s a constant theme that repeats itself over and over, and a large part of why we chose the STP structure.

The Scandinavian region is quite a unique locale relative to other more traditional jurisdictions. How does this region compare to others?

There is a Swedish concept called Lagom which has to do with moderation for the purpose of focusing your endeavors thoughtfully and productively.

While financial institutions should prioritize profits, which are essential to a successful business, the Swedish mindset prioritizes service and thoughtfulness above greed and excess.

We certainly take this concept to heart, and it’s in the DNA of the broader Scandinavian market. Sweden’s banking institutions are well-capitalized, and the trust in them compared to other jurisdictions is noteworthy.

As traders begin to see these practices lived out in how we serve them, they become more confident.

What’s different about how Scandinavian Capital Markets serves and builds confidence for clients?

There’s already risk associated with trading by its nature, and we want to eliminate the surrounding confusion and shady perception generally attributed to brokerages.

The only way to do that is through real and sustained relationships. We made a conscious decision when we started that we would differentiate ourselves as a straight-through-processor.

Of course, we believe our model and products make us competitive, that oversight and our general business practices prioritize people while also producing results.

What is it like working with your clients and some of the best traders in the world?

It’s truly been an honor and a pleasure. We strive to build a network of high caliber partners, and I’m convinced that the success we have had in earning their loyalty is due to our focus on relationships first.

But we still have to walk the walk, we’re here to help and support our clients, and that goes beyond the trade.

Think about this. With B-Book brokers, the vast majority of their clients lose money. Yet, we flip that entirely on its head. Roughly 80% of our traders make money.

We made this possible by focusing on the professional and institutional clients rather than retail. It’s not just about the transactional fees.

Rather, we cultivate real relationships where all parties win over the long-haul.

Thanks so much for your time, I’d like a few final thoughts from you but I did want to ask what would you say to a trader who is afraid and uncertain during this crisis?

Even in these circumstances: the reward potential is huge. I think the biggest challenge with everything else going on is keeping a level head.

Think about what is essentia, and be confident in the fact that there will always be an opportunity in currency trading. Our clients and traders know that we’re there to support them, and that’s made all the difference.

Source : https://www.financemagnates.com/thought-leadership/how-to-navigate-a-crisis-and-weighing-the-potential-of-forex/