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Trading Volatility Tips

Volatility

When the market begins to move, it’s good to have some tips with you. Below are our tips/strategies to manage risks.

1. The color between the lines
To buy the trend everything you need is like the colors between the lines. When the market becomes close to support, look for it rising up; If it approaches resistance, prepare for a drop. The positive side of the trend markets are that they are so easy to discover. They can appear as easily in a two-minute chart as a two-hour chart. Take a look at this chart below. (over EUR / USD (Euro / US Dollar) in a two-minute time frame):

Trading Volatility Chart 1

As I mentioned above, it is very simple. Unfortunately, it is not as easy to determine how many pips you see to risk or win. This is a skill that requires experience.

2. Break Out of the Mold

It’s a bit of a triumph to try to choose where / when the market will change.

In addition, traders often trade in crews. This means that at times levels will break violently because too many traders are aware of them. Leads to stop the orders stacked around their edges. A good alternative to trying to choose where the market can turn is, after all, trying to poke that level and trade the breakout.

To get the best results you must find
the level you are looking for to utilize. Then you place the order before the market reaches it and keep your stops within the limits of your target. This means that sometimes you will get 15-20 pips on a currency pair that usually moves close to 100 pips a day, but if it’s faster, electrical possibilities are what you’re looking for. When it comes to breakouts, they rarely match their tension levels. It goes without saying that you are attentive, but there may be great opportunities.

Trading Volatility Chart 2

3. How to handle a guess
If you like excitement and impulsiveness, it would suit you to place your trade around major news about economic events. It can be risky because of the major features that can follow a press release. Therefore, you should be prepared in time.

It is important to make sure to place your trade before the news hits to achieve success with this method. You can do two different types of guesses:
The educated guess about what the market will tell you before. The second guess is the logical guess about which way the market will move, based on your educated assumption.

Consider examples of the event that usually create the most movement in a given month.
Ex: US salary that does not go to agriculture. There are an amnesty rules that say that USD / JPY (US Dollar / Japanese Yen) is usually the most logical response to major US financial issues. So if data is bad for the US, USD / JPY goes down, and if data is good for the United States it goes up.

Publications and analyzes of expectations will also be published by analysts via press releases such as NFP. These are important for the likelihood of the market. If expectations are met, traders should not expect too much of a move. Alternatively, if the message is far beyond expectations, it can be a big move.

Before the NFP goes out with the official publication, there are also a number of economic indicators that measure employment. These should also be used as guides to do an educated guess. You can also guess what the NFP will reveal.

Trading VolatilityBecause the educated guess calculated a bad result. Is it logical assumption to sell USD / JPY before the issue. Do not forget to use stops and goals, it’s very important because managing wrong guessing is crucial to saving the balance of your account.
If you look at the chart you can see that they would have been a pretty good guess to predict a bad result.

Trading Volatility Chart 3

The NFP report is of course not the only tool that can be used like this. For example, you can summarize Consumer Confidence data to guess what the US retail may be. You can also compile inflation data to guess the tone of a central bank’s monetary policy decision. There are extremely many possibilities!

4. The market gap
17:00 every Friday afternoon Eastern Time closes the foreign exchange market for the weekend. However, the lack of motion on your trading screen is an illusion; the market is still moving. The encouragement of prices continues to be encouraged based on what’s happening around the world even though the market is closed. This movement is only seen until Sunday at 5:00 AM Eastern Time. This is what it means to result in a “market gap”.

Trading volatility after these gaps that occur during the weekend is an easy way. But keep in mind that just like any strategy to trade, it does not work every time. Therefore, be sure to place your stops and goals at reasonable levels.

Imagine China released any data over the weekend. The markets are closed, which would have shown that their finances were contracting more than most expected (if they were now open). The typical reaction to this kind of news would be for currencies from countries that are heavily dependent on trade with the Asian giant to write off, AUD is the main among them. With the markets being closed, you do not see this movement until Sunday at 17:00 Eastern Time.

So what’s left is what is called a “market gap”. There is an area on your chart where a light (or bar) jumps from a price to a completely unloaded price with no info in between.
Thus, the market sometimes ends up at the price it was closed on Friday. This is called “closure of the gap.”

Trading Volatility Chart 4

 

5. The conclusion.
There are incredibly many different ways to get an exciting time to trade the market. However, each method listed here has some advantages while also having a potential for disaster. Always remember to focus on managing your risk and ensuring that your spontaneity is not about ruthlessness. It is extremely important for your business to be sustainable in the long run.