How Experienced Traders Navigate Volatility

8月15日

In today’s turbulent markets, it is a timeless reminder to discuss volatility, how experienced traders can navigate volatility and manage their risk, and why it’s important to always be prepared. Recently, we saw dramatic price action with the USDJPY influenced by the Bank of Japan’s policies or even XAUUSD against the Dollar. In this post, we’ll be discussing the art and science of volatility in forex markets and aim to remind all traders about what it is and how to deal with it.

Understanding Forex Volatility

Volatility is quite simple, despite sounding complex. At its core, volatility measures how much a currency’s value deviates from its average. High volatility means more significant price swings from its average and low volatility means less significant price swings or a lack thereof. Now that you understand the basics, let’s move on to the next concept – trading around volatility and the associated risks.

Trading in Volatile Markets

Experienced traders know that volatility will spike at some point in a market cycle. Throughout market history there have been many examples of this, and volatility spikes can correspond with market crashes, unexpected economic figures, and major news events, such as elections or wars. These volatile moments may present opportunities to the prepared trader, but it is also equally important to manage your risks in these scenarios. Therefore, the first step to this is crucial: be fully equipped for it.

Know The Risks

Experienced traders can find potential opportunities in volatility, as mentioned above, but it also means more risk because of potentially higher spreads, faster and unexpected price movements, and larger percentage moves in either direction. That’s why it’s important to assess your risk tolerance before diving in, and once again, be prepared for volatility to strike at any moment.

Technical Indicators for Volatility

There are several technical indicators that you can employ on your charts to measure volatility in the currency pair that you’re analyzing. We’ve compiled a small list below to get you started, but please keep in mind that there are many more to share in an upcoming post here on TradingView, so please stay tuned for more updates from us:

1. Bollinger Bands: Measures and displays a currency pair’s standard deviation.
   
2. Average True Range (ATR): Shows the average range of symbols over specific periods of time.
   
3. Relative Strength Index (RSI): Measures price change and size.
   

We Know Volatility

We’ve seen booms and busts, and presidents come and go over our 20+ years working in forex markets, but throughout that time we’ve remained steadfast, providing traders with the education, resources, and tools they need. That’s why we publish content like this to ourus official TradingView profile – be sure to follow along.