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  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. #21
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    Quote Originally Posted by Hukam View Post
    Well mate if market is volatile that mean is not that its very dangerous for us depend upon your risk and reward. And we don't have to forget about our risk and money management. Depend upon your entry point too some time a good high volatile market can give you a big amount of profit too. I like high volatile pairs very much

    High volatility means high risk also. I like low risk and so I always use small leverage. leverage use to compliment all these our little investment. But it is said that the higher the leverage the higher the risk while at the same time the more chances you have in making more profits. But safety should stand first.

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  3. #22
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    we want to minimize the risk, we did not know exactly where the price will move because the market is so complex and many factors that influence price movements. We are only able to analyze and predict based on the specific analysis, thus better understand the trend of price movement itself.

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  4. #23
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    Quote Originally Posted by ngalapreceh View Post
    we want to minimize the risk, we did not know exactly where the price will move because the market is so complex and many factors that influence price movements. We are only able to analyze and predict based on the specific analysis, thus better understand the trend of price movement itself.
    I like trading news and for that safety is very important. The safest way to trade with fundamentals is to note the calendar for news with high impact and steer clear the market until such news is out and factored into the market then trading can be done inline with the outcome of the report.

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  5. #24
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    Quote Originally Posted by AmitChallenger View Post
    I like trading news and for that safety is very important. The safest way to trade with fundamentals is to note the calendar for news with high impact and steer clear the market until such news is out and factored into the market then trading can be done inline with the outcome of the report.
    I tried to combine fundamental and technical analysis, if we do not understand the trading system we use and are not familiar with the character it would be difficult to understand the direction of the market, to determine when to cut losses and when to take profit, but to be able to profit, we must can minimize the loss, so that more profit than loss

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  6. #25
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    Quote Originally Posted by ngalapreceh View Post
    I tried to combine fundamental and technical analysis, if we do not understand the trading system we use and are not familiar with the character it would be difficult to understand the direction of the market, to determine when to cut losses and when to take profit, but to be able to profit, we must can minimize the loss, so that more profit than loss
    Combining both technical and fundamentals can be a great way of trading.Also we should ensure we can do that with confidence. I think when we lose our confidence we can gain it again. it totally depends on us. So we should not worry and lose hope.
    we should try our best to move forward.

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  7. #26
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    Quote Originally Posted by ngalapreceh View Post
    I tried to combine fundamental and technical analysis, if we do not understand the trading system we use and are not familiar with the character it would be difficult to understand the direction of the market, to determine when to cut losses and when to take profit, but to be able to profit, we must can minimize the loss, so that more profit than loss
    When it comes to the trading of volatility of the market, I do not even disturb myself much, this is because I know that it is not what will give me success in the market, but right trading analysis. So, I only go for the sure market trend, and let the market decide the rest. But in knowing the volatility, I use the wideness of my candlesticks chart mainly.

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  8. #27
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    Quote Originally Posted by cozard007 View Post
    When it comes to the trading of volatility of the market, I do not even disturb myself much, this is because I know that it is not what will give me success in the market, but right trading analysis. So, I only go for the sure market trend, and let the market decide the rest. But in knowing the volatility, I use the wideness of my candlesticks chart mainly.
    Volatile markets call for more attentions. And in recent days the market have been too volatile for comfort in recent times as the market seems tilted to favor the Euro notwithstanding the data on the ground that suggests otherwise. I think is safer not to be too aggressive these days.

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  9. #28
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    Quote Originally Posted by shivanandfx View Post
    Volatile markets call for more attentions. And in recent days the market have been too volatile for comfort in recent times as the market seems tilted to favor the Euro notwithstanding the data on the ground that suggests otherwise. I think is safer not to be too aggressive these days.
    We should keep patience to determine best time to trade. I know some professional trdaers who keep saying "forex need time, forex need patience, practice forex so much to learn it well". I'm not rusher and i 'm trying to follow this tips as possible as i can, I will do my best to reach an expert level in forex trading.

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  10. #29
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    Quote Originally Posted by forexfighter007 View Post
    Combining both technical and fundamentals can be a great way of trading.Also we should ensure we can do that with confidence. I think when we lose our confidence we can gain it again. it totally depends on us. So we should not worry and lose hope.
    we should try our best to move forward.
    good thinking for traders to combine technical analysis and fundamental analysis and they will complete each others, and it becomes a good validation before enter the market to get the right entry and exit.
    and of course, losing is a part of this business and become ours as the results, but all depend to us, we just do not make losing is as a bad thing, do not lose hope for better trading with keep learning and practicing

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  11. #30
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    Quote Originally Posted by Value trader View Post
    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?
    as trader to work on haunting of the projected options with the use of the selection with the analytic system; those to had in commons as to earns of the beginning initials as further to arrange of more with the deeper solution on referring of supports on confirmation as requesting order.

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