If you remember well (and if you’re an avid reader of my blog posts, which I hope you are), I already mentioned volatility in the Forex market in a previous blog post where I compared Forex trading to stock trading and explained why I like Forex more.
My point in that previous article was that since Forex is much more volatile, there are many more opportunities to make money in Forex.
In this article I would like to go a bit more in depth about volatility in the Forex market. After all, while volatility is great, it’s also one of the reasons why a lot of beginners fail to ever make profits. It’s therefore definitely worth talking – and blogging – about.
Volatility In The Forex Market
Volatility is great. It’s what makes my world go around.
If you just open your Forex trading platform right now and have a look at any major currency pair, you’ll see it right away.
Open EUR/USD and measure the movements of the price each day. It will always be in the 100 to 150 pips range. That’s 150 pips every day of the week. A hundred and fifty opportunities to make money. Some pairs have even higher ranges, and if you start accumulating the pairs and trading across the board you get to a point where you’re looking at thousands upon thousands of available pips. How amazing is that?
Volatility means two things: a lot of movement and fast movement. Both can be great if you know what you’re doing. But if you don’t, fast movements can be very dangerous for your Forex trading account.
In my Forex trading course I teach you about volatility. I also teach you to always use a stop loss and be prepared for all eventualities. It’s important that you remember, every time you trade, that things can go wrong. Never forget to use a stop loss – It could be the only thing saving your account!
Being On Volatility’s Right Side
We know that we have to be careful. Volatility can bring us many pips but can also make us lose many pips, it works both ways. Now how do we make sure that we stay on volatility’s right side?
My trading strategies are tailored to be used in the Forex market (actually in any markets, but that’s another story for another time) and rely on volatility. They are designed to have you enter at the right time and on the right side of volatility. If you take the straddle strategy for instance, you can see that every time you enter a trade is when a significant price level breaks. Significant levels breaking means high probability of the price shooting in the same direction, and therefore volatility on your side.
Volatility for us traders is highly important. We couldn’t make profits from something that isn’t moving, it’s as simple as that. Making sure we use the volatility to our advantage however, that’s the real trick.
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