Brian K982 Young#28

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What is scenario analysis in forex trading and why is it useful?

Scenario analysis tests strategies under different hypothetical conditions, such as rate hikes, geopolitical conflicts, or recessions. Institutions use scenario modeling to prepare for tail events. Retail traders can apply simplified versions, asking “what if USD drops 5% in a week?” Benefits: preparedness, reduced emotional shock, and clear contingency plans. Risks: relying on unrealistic scenarios or failing to act on results. Scenario analysis is a rehearsal for the unexpected—traders who plan for extremes are better equipped to survive them.