Managing High Volatility!

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

  1. TraderAnalyst

    TraderAnalyst Senior Investor

    Apr 2019
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    The advantage with high Volatility is high profits can be made very fast . But the only condition is one must be prepared and disciplined to work in volatile markets. Most importantly one must be really mentally strong to take the risks involved and not let it dampen your spirits.
  2. J_C_Anderson

    J_C_Anderson Senior Investor

    Aug 2018
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    For sure, high volatility is often associated with high risk, so as you have mentioned before, trader should be prepared for working in such conditions. This preparation includes technical and psychological parts.

    First of all trader needs a strategy that will work great during the high volatility periods. It is quite difficult to say which principle this strategy should employ: it could be based either on catching the reversal or on opening positions near the important levels. Anyway, indicators would not be very useful since almost all indicators are lagging, so the signals they provide would come with a substantial delay that can be too long for rapid price changes. Trendlines, the most universal tool, will underperform too because they need strong trend movements to be efficient.At the same time, support and resistance levels would work great, so the trader should know how to use them properly. Trader could check the performance of his strategy under this conditions by using special backtesting software like Forex Tester that helps to test the strategy through making simulated trades on historical data. As the result, trader could find out about the outcomes he could expect to and make changes or improvements if necessary.

    Trader should be also prepared ffrom the psychological part since he will have to make trades lacking time and information. Such trading is very stressful, so the only way to manage with it is to act strictly in accordance with the rules prescribed by trading strategy to avoid mistakes made under the impact of emotions.

    Another important element of preparation to high volatility trading is equipment check. Trader should know what to do in case if, for example, the connection to the Internet would be lost.

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