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Volatility Trade
Trading on the financial instruments with high volatility is rather a difficult task, especially for intraday traders. In this case technical analysis works with a lower success rate than when you are trading the daily charts of the major currency pairs. Therefore, in the trading on the volatility is necessary to consider some points, which will be discussed in this article.
The below recommendations will help anyone who trades on the Forex and in particular does a volatility trade, no matter what strategy they use.
The first advice relates directly to pairs with high volatility. Such pairs should not be traded beneath the hour time frame. Fluctuations in prices lower H1 does not largely carry a scenario of price changes, they are difficult to predict the movement and do not represent the actions of the crowd from a logical point of view. Therefore, if you are going to trade on the volatility instruments within the day, do not use the time-frames below H1.
Pick the most obvious entry points, when you have no doubts that they are really correct. Do not try to discover the entry points where they do not.
When you are trading on the volatility instruments you need to act quickly, the time for deep analysis and long reflection is not enough. Your trading strategy should be pretty simple. If you are a beginner trader, it is best to choose only one pair for analysis.
Follow the rules of money management. Try not to risk more than 2% of the deposit per transaction. When trading on the pairs with high volatility due to the rapid change of quotations trader will quickly have appearance of visual and emotional load and often losses significant profits. It can easily demoralize you.
Pay attention to the value of a daily volatility of the instrument. The daily volatility - is the distance traveled by instrument per trading day from point High to point Low. For example, the daily volatility is equal to 500 points. In this case, when trading intraday a profit target of 1500 points from the opening price will be unreasonable. And also not wise to open a position if the price has already passed 400 points. If you have an opened position and a profit on it reaches 350 or 400 points, it will already be appropriate to consider the option of closing or transfer take profit to achieve profits level closer to the current price or to carry a stop loss to breakeven. Data on the daily volatility provide a variety of Internet resources covering the specifics of trading in financial instruments.
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