Forex market volatility refers to the number of price alterations a security or a currency experiences over a given period of time in the forex trading market. If the price of a security or currency stays comparatively stable, it is said to have low forex market volatility. Once a security or currency is seen to have a lot of price fluctuations/movements, striking new highs and lows and undergoing rapid increase and subsequent falls, it is said to be highly volatile. Forex market volatility can, therefore, be the amount of uncertainty or risk on the dimension of fluctuations/changes in a security’s value.
MAJOR CHARACTERISTICS OF FOREX MARKET VOLATILITY
- RETARDATIONS: volatile forex markets are often associated with a high level of forex trading activities which usually causes a delay in trade executions. These increased volumes of trades have the capacity to cause trades to occur at prices that are different from the actual forex market price quoted at the time the trade order was executed. A major way to avoid this catastrophe is that forex traders should do well to gain knowledge on how market makers execute trade orders when the forex market is volatile.
- SYSTEM HAVOC: in forex market volatility, the execution of numerous trade orders can seem very difficult due to system capacity limitations. Forex traders tend to experience difficulty accessing their trading accounts based on an increased level of internet traffic while trading online. Therefore, online forex traders should trade forex market volatility using other alternatives like phones or contacting forex brokers to initiate trade orders.
- INAPPROPRIATE TRADE QUOTES: forex market volatility is often associated with a high volume of price differences between the price at with a particular trade is effected and the quote received by the forex trader. This reason is solely based on the fact that in a volatile forex market, real time forex quotes are seen to be far behind the current happenings in the forex market. Secondly, the share made available for the size of the quote may fluctuate rapidly creating a scenario where the quoted price won’t be available to the forex trader.
TIPS ON HOW TO TRADE FOREX USING FOREX MARKET VOLATILITY
USE OF FOREX TRADING INDICATORS
Forex market volatility is a fraction of price fluctuation that occurs every minute and seconds. For most forex traders, if there are no price changes, there are no profits. The best way to trade forex by way of forex market volatility is with the use of chart patterns and forex trading indicators which states the period of highs and low occurrences. These forex market volatility indicators come in form of Bollinger bands, volume, resistant and support levels which help forex traders identify possible reversal points as currency price fluctuates. With these indicators for trading forex, forex traders can easily buy stocks and currencies on a long-term strategy as the price decreases and then ride the upswing to sell the price increases.
CHOOSING THE RIGHT ORDER
As a forex trader in the forex market, the order being used in forex market volatility is very crucial especially when a lot of fluctuation is seen. In forex market volatility, the limit order which is said to be the order sited with a brokerage to buy or sell at a specific amount of shares and at a precise price should be always employed. Although limit orders may be more expensive than market orders, they are the best orders to make use of in forex market volatility since a definite price at which a currency can be bought or sold is set.
REVIEWS ON FOREX MARKET VOLATILITY
When it comes to analyzing forex market volatility, forex traders are seen to feel the discomfort of loss more than the joy of gain, they take a volatile forex trading security or currency that moves up and down to be an unnecessary risk proportion. However, forex market volatility is a platform that provides a lot of money making openings for a persistent forex trader. This is because forex trading is all about risk were a forex trader either loss or gain creating failure or success.
Forex market volatility is very beneficial to long-term conservative forex traders where a trading position can be held for a long period of time using a buy and hold strategy by buying currency pairs and holding them for an elongated period of time thereby giving room for incremental profit growth. When viewing forex market volatility using this method, it is based on the fact that in the period of forex market movements and changes, a profit is being grown in the long run.
In forex market volatility, as the price fluctuates and moves, it gives room for forex traders to buy securities and currencies when the price is very low and then patiently hold on for collective profit increment on the long run.
In conclusion, every forex trader should have in mind the rate of risk that is associated with forex market volatility because every trading strategy either gets you up or takes you down.