The best ways to trade forex in high volatility market. When you learn Forex market, you need to be familiar volatility. The volatility of Forex market refers to the rate of currency pairs which fluctuate over a particular period of time. In the Forex market, you will see that currency pairs fluctuate at much quicker rate over comprehensive ranges when the volatility level is high. Then, how can we benefit this so-called volatility?
How to Trade Forex in High Volatility Market
Trading Forex in high volatility market can be a sword with two blades for Forex traders. This is because you have a chance to gain very high profit and also extremely bad loss at the same time. That is why many senior traders do not recommend for trading in this typical market because it has such high risk to enter a position.
About Trading Forex in High Volatility
Before learning more about the best ways to trade Forex during the high volatility level, it must be better for you to know what high volatility in the Forex market is. Sometimes the market seems to be calm in a few sessions and it suddenly becomes different with hundred of pips fluctuate in the market. It is what we called as volatility.
When we are talking about volatility in trading Forex, there are two types of volatility that you can find in the market: historical and implied. When it comes to historical volatility, it refers to regular price action over a time period such as a year or a month. In contrast, implied volatility refers to an abnormal recent or future price action.
Tips to Trade Forex in High Volatility Market
Thus, what should we do when the market shows such high volatility level? As a trader you actually need to apply the right Forex trading strategy in order to get the most of profit when the market shows high volatility. Considering the occurrence of implied volatility in the Forex market, here we have some best tips to turn high volatility into your favor.
#1 Widen the Targets
One of the most rational things to do when the Forex market gets restless is to widen the take profit or stop loss targets. When the market volatility is high, there can be three possible ways the price action behaves including running for hundreds of pips. In this market, it is recommended for you to improve your take profit as well as stop loss targets.
#2 Minimize Your Losses
Occasionally when the volatility is big and the price action broken up, it is wise to employ small stops and large take profit targets. This method typically provides best results when employed to ranging markets. It seems contradictory to the method discussed before, but it can actually work too. Since you won’t know when the price might break out, you can keep a taut stop-loss.
#3 Lower the Leverage
Leverage is highly helpful for traders who aim to gain big profits even with an inadequate amount of capital. Nevertheless, leverage can also be the main killer for every trader who doesn’t use it wisely. When you want to trade on volatility, it is recommended to lower your leverage as you widen your stop loss target. Eventually, your risk must stay at the same ratio.
#4 See the Bigger Picture
The last but not least, you need to look at the big picture when trading on market volatility. When the volatility is high, the market seems to move around without obvious direction. As a result, you need to see the bigger picture to avoid bad losses. Then, you need to help your mastery by learn Forex from various sources too.