Greater volatility in the forex market shows more profit-making opportunities for traders. The price of currency pair swing may be on the loss side or on the profit side. However, unless you trade carefully and wisely your profits can easily turn into losses. During volatile markets, many traders get spooked and start to question their trading strategies. This fact is true with novice traders, who are most tempted to pull out of the market altogether. Traders must follow some precautions while trading in volatile markets. While trading in such a market situation, traders must follow the steps below:
Be choosy while placing trades: In order to get the benefits of the opportunities offered in volatile markets, traders get tempted to place the maximum number of trades. You must learn to avoid such temptation. Don’t forget that in volatile markets, losses are likely to be big. So, before placing trades, determine the level of risk involved in trading and be selective while picking up the trades.
Trade with smaller trade positions: Leverages have a great impact on trades when the market is volatile. Traders must be aware of how much leverage is being traded by them that can’t affect their portfolios. Well, in simple market conditions, placing a trade with 2 lot position is pretty good when you are planning to make around 50-100 pips. But, in volatile markets, traders should look to taking on smaller trading positions.
Trade under discipline: It is well said that discipline is the major key to profitable trading. When you see that the market is volatile, then you must trade with discipline. Restrain yourself from making silly mistakes and also try to stick to your trading budget and strategies. Try to implement risk management strategies that will definitely help you in reducing your risk ratio.
Tighten your stops: It will really work in your favor if the market is volatile. Tight stops can help you to protect the position of your currency in the market. Try to place a stop with a few pips. This will help you to manage risk in a better way. So, don’t feel shy to use tighter stops in volatile markets.
Try to search out what is making the market volatile: Try to figure out the reasons that are
making the market volatile and also keep yourself prepared for unexpected situations. Once
you will figure out the actual reason, you will easily handle the situation by making the right trading
decisions.
