High Volatility, A Big Risk!

Discussion in 'General Trading Discussion' started by TraderAnalyst, Aug 9, 2019.

  1. TraderAnalyst

    TraderAnalyst Active Member

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    High Volatility is a big risk in Forex Market The political and economic policies around the globe can change anytime and this may greatly affect the forecast. And naturally the traders will have to suffer big losses in such condition as the market can suddenly go down anytime. Thus traders must be ready for these circumstances.
     
  2. J_C_Anderson

    J_C_Anderson Senior Investor

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    For sure, elevated volatility makes trading risk higher (sometimes even to high to trade, especially for newbie traders). At the same time, most of the best trading oppoprtunities take place during periods of high volatility, so each trader should evaluate all pros and cons and make his own independent decision on whether to make a trade or to stay outside the market (as professional traders often say, no position is a position too).
    To be able to make reasonable decision, trader should know how his strategy would perform in such conditions. The simplies way to define it is to backtest it on historical data. It is necessary to use relatively long period of time that would include both periods of high and low volatility to get the reliable results. There are special tools offering such possibility, like Forex Test special backtesing software. The main advantage of backtesting in comparison to manual testing is that it allows to use wider periods of time to increase the accuracy of final testing results whiel it would take several months to make dozens of demo trades to get similar number of trades to analyse. Another important advantage is that using demo testing you can choose one particular period characterized by high volatility and use it to check several strategies from your playbook to define one that works best.
     

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