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Thread: Trading with the volatility

  1. #1
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    Trading with the volatility

    Hi traders.

    Today I’m going to share with you one simple concept that can help you get profit in the market that you don’t understand. What I mean is that sometimes markets don’t show any signs of directional supply and demand. They go back and forth, sometimes you see that something is happening (some momentum is developing), you expect it to continue, but more often than not price suddenly drops beyond all supposed support levels.

    Just a look at the chart below - can you say that you have a predictable price action here?

    Attachment 11882

    No indicators can help you decypher this action as well. Such market condition can be best described as unpredictable and volatile.

    But is it really impossible to succesfully trade in such market having limited risks at the same time? Every professional trader is aware of risk he is going to take, whilst amateur traders can trade without stops. In other words - can we have reliable and reasonable stop in such market?

    Yes, we can. But in our trading we have to rely not on price action itself (it can be confusing) but on volatility. Look at the screenshot of ATR indicator below. This indicator measures volatility. You see that volatility cyclically moves in sort of a horizontal channel:

    Attachment 11883

    The key here is that when you have period of reduced volaility, it is often followed by growth of volatility pretty quickly - it is very uncommon for the market to stay in a phase of reduced volatility for a long period of time. But how can we benefit from that? We don’t have any volaitility index to trade.

    Yes, but nethertheless we can benefit from such behavior of volatility. First of all, small parameter of volatility means that our stop loss can be also small. Secondly, small volatility often occurs when we have very tight trading ranges like this:

    Attachment 11884

    Guess what happens when price emerges from such trading range? Right, this is volaility break. Price breaks out from this range and makes significant directional move, more than 30 pips. We don’t know the direction of further breakout, yet we know that possibly this breakout will lead to directional move. The more time it takes to form trading range with low volatiliy, the more rapid breakout will follow:

    Attachment 11885

    So, you can just place buy stop or sell stop orders to get on this move, having very small stops at the same time. Breakouts can be false, yet you lose a few, and earn much more. The key principle here is to cut your losses quickly and never “nurse” bad trades (this is universal principle of momentum trading)

    For example, such type trade could be described this way:

    1. You see extended trading range with reduced volatility;
    2. You place sell stop order to enter a position on a breakout from this range;
    3. You don’t move your stop until price retests previous level and ensures that there are no more stong buyers in this market;
    4. You enjoy freefall of price and prepare to take your profits.


    Attachment 11886

    But of course, you have to be aware of overtrading and be very patient in a process of trade selection. If you do everything right, you can have nice profits trading along with volatility, even if you don’t have any ideas of destination. If fact, when markets are trading in a trading range (they are supposed to trade there 80% of the whole time), nobody can really predict destination of price, so trading with the volaility can be a good option.

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    Last edited by Value trader; 12-17-2014 at 11:04 PM.

  2. #101
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    Quote Originally Posted by silverlady View Post
    it is huge my friend trading with volatility of forex business is not the best thing for traders who is conservative, it can affect with a sharp movement, and the stop loss of traders will be affected. i prefer trading when the market is not too lousy, it will reduce tension.
    We should be able to handle all market moves and this is achieved with lot of learning and experience. These days market have become more unpredictable. In recent days the market have been too volatile for comfort in recent times as the market seems tilted to favor the US Dollar notwithstanding the data on the technicals that suggests otherwise.

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  3. #102
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    Market is dynamic friend and there is no control of us on market all the time, stop loss and proper patience is important to enter and exit with good profit and less loss. Market is unpredictable since the starting, nobody can be 100% but there is no doubt in it that the market trend analysis, technical analysis, these have proved average winnings in forex.

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  4. #103
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    Quote Originally Posted by Khimi234 View Post
    Market is dynamic friend and there is no control of us on market all the time, stop loss and proper patience is important to enter and exit with good profit and less loss. Market is unpredictable since the starting, nobody can be 100% but there is no doubt in it that the market trend analysis, technical analysis, these have proved average winnings in forex.
    [lang=id]very well, it is good understanding if the traders understand that the market is dynamic, then it will give them some points to keep good their balance with protect them, there are some ways for this and the main important thing for us that we need it as the savior to protect it from unwanted situation[/lang]

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  5. #104
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    I think this type of trading is like as scalping style because market move very fast then we can make profit easily without long time waiting then we also not need very huge knowledge because when I was newcomer like as beginner then I just make trading when market get in volatile , specially news time .

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  6. #105
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    Quote Originally Posted by samprazaan View Post
    [lang=id]very well, it is good understanding if the traders understand that the market is dynamic, then it will give them some points to keep good their balance with protect them, there are some ways for this and the main important thing for us that we need it as the savior to protect it from unwanted situation[/lang]
    To gain a stable and consistent its very important to use your management strictly for your trades, the use of big risk would give you a lot of problem, market challenges, behavior, patterns, and uncertainty these all could be changed every day, Trader's should have the exact distinction of a best trading management, otherwise low quality of management would not be effective in volatile and uncertain market.

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  7. #106
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    Quote Originally Posted by Hukam View Post
    To gain a stable and consistent its very important to use your management strictly for your trades, the use of big risk would give you a lot of problem, market challenges, behavior, patterns, and uncertainty these all could be changed every day, Trader's should have the exact distinction of a best trading management, otherwise low quality of management would not be effective in volatile and uncertain market.
    Of course, that is the way I see it as well sir, the traders who will ever get the stable earning in the market would have to do the things of the management without deviation. It is not always about how good the strategy you are using is, but the way you have carefully show how you can progress and have success in the market.

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  8. #107
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    as to access with the acceptable adventitious on earning with the allotment of the plan with the signals analytics; acceptable banker administer of the acceptable spends as to spares of the acceptable barter as barometer of added with the added on ample of the college befalling as to admixture of the bigger allotment with the accordance.

    - - - Updated - - -

    Some of the able traders use the animation i the trading and all of the acclimated abstracts accustomed can be acclimated as a apparatus to adviser them to a assertive adjustment . so I may anticipate of the indicators of animation which may indicates to us the acceptation of a acceptable gestures to the top or low deals or the trades in the accomplished market

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  9. #108
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    Quote Originally Posted by Hukam View Post
    To gain a stable and consistent its very important to use your management strictly for your trades, the use of big risk would give you a lot of problem, market challenges, behavior, patterns, and uncertainty these all could be changed every day, Trader's should have the exact distinction of a best trading management, otherwise low quality of management would not be effective in volatile and uncertain market.
    that is what i knwo sir, the traders with the mind of trading to make the money will make it very well when they knwo what to do and making the money. the trading of this business with management will secure the good work of traders and make them earn.

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  10. #109
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    Trading with higher volatility is often a successful buying and selling process although you need to have an excellent technique for in which. I'm sure a new buying and selling process needs to be properly screened initial we have to hang out with higher unstable pair in this trial buying and selling consideration and should make a very good buying and selling technique for number of higher unstable sets. Personally I love to earn money inside higher unstable industry situation.

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  11. #110
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    Quote Originally Posted by silverlady View Post
    that is what i knwo sir, the traders with the mind of trading to make the money will make it very well when they knwo what to do and making the money. the trading of this business with management will secure the good work of traders and make them earn.
    That is what every traders are aspiring to do. They are looking for a way to trade and make money. And in learning, the trader can have experience and use that to know what to do at any point in time. And traders will know the beauty and the good use of the right trading management if they have the experience in the market.

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