If you are deciding to invest in Forex, you need to know that the volatility is a risk for the traders. It is also how they can make a profit but the risks of losing money are higher than making a profit. The normal trading with expected volatility and the volatile markets. Example of expected volatility industry is the sessions where currency pairs are traded like the European session. In the volatility, the movements of the pairs or commodities are higher. Examples are the commodities because they have high movement in the prices. As volatility related to your profit, most traders like to go for the volatile market. This article will give you some tips that you can use when investing in volatility.
Impact of the news
Do you know why the market becomes volatile? Those who have experienced the price movement of the financial instrument during the Brexit news will truly understand the extreme nature of this Forex market. The GBPUSD pair fell more than 2000 pips within a day. Such a massive drop is enough to wipe out the whole account of inexperienced traders. As a Forex trader, you must know the severity of the news. For instance, you can trade normally when there is medium impact news. However prior to heavy impact news like NFP, FOMC statement or MPC official vote, it is highly imperative you scale your trade to save your investment.
Using the price action signal
Price action signals are one of the best ways to execute trades during the high level of market volatility. Forex trading is a very sophisticated profession. You have to take steps very carefully or else you might lose a huge amount of money. By learning price action trading you can easily eliminate the risk factors to a great extent. As a price action trader, always use the daily or weekly time frame. Forget about the lower time frame data as it generates too many false signals during high impact news release.
Delayed trade executed
One of the things you need to know is there can be delays in a volatile industry. The movement does not say that you will get a faster result in your trades. As the traders place their trades with a high volume of money, it may slow your trade. If you are not sure, you can ask your broker to inform you about the delay. The online trading does not give you money instantly and when you are trading in volatility, higher volume of trades may result in slow processing.
There can be digital errors like you cannot place the orders, the internet is down, and your platform is not working and others. Though the volatile industry is less visited, they are a popular destination for many traders. They place a high volume of money in their trades and they make a profit. Know these digital mayhems and it will help you to plan your strategy. Make a plan if there are mayhems. Knowing about these risks will keep you safe.
Choose position size wisely
If the position size is big, you will lose the money. A smaller position size will also give you less profit at good trends. Set your position size wisely that it does not put your money at risks. In volatility, the trends will move quickly and you need to set the right position size to save your account. Try to practice in the demo account to know the result of different position size.
Without stop-loss, you will find you are losing all of your investment. There is no limit to trend movement in volatility and stop-loss is a way to save the money. The traders focus on the price trend but they cannot expect where it will go. It can go in their favor and also against in their favor. The best way is to set a stop-loss to save your money.