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VOLATILITY IN THE FOREX MARKETHello Forex traders. Today we are going to talk about the concept of Volatility in the Forex market. We will talk about what it is, what volatility depends on, and most importantly how we can use this data to build and improve our own trading strategies and, as a result, get more profit from trading. What Is Volatility? Volatility is the range of price changes from high to low during a trading day, week, or month. The higher the volatility, the higher the range during the trading time period. This is considered to be a higher risk for your positions, but it gives you more opportunities to earn money. Volatility can be measured over different time periods. If we open a daily chart and measure the distance from high to low, we will get the volatility of the day: It turns out that on the chart above, it was 121 pips. We can also measure on another timeframe, for example, weekly chart. The distance from the high point to the low point was 162 pips. The total volatility during the week was 162 points. Volatility can be measured within a trading session or within a trading hour. This allows us to conclude that it is a fractal value. As a rule, the average volatility for the last candles is taken into account. If we take daily charts, the average volatility is usually considered for the last 10 days. Roughly speaking, the last 10 candles are summarized and divided by 10. What Does Volatility Depend On? It depends on the number of trades in the market, players, trading sessions, the general state of the economy of a currency, and, of course, on speculation. It depends on how speculative the market is about a given currency. Note that volatility can be measured both in points and in percent. But it should be noted that most often, the volatility of stocks is measured in percent. In forex, it is more usual to measure in pips. If you are told that the average price change of EURUSD is 0.7%, you can easily convert it into pips. And vice versa, you can calculate percentages from points if you need them for any research. Now let's move on to the most important question. How To Apply Volatility Data For Profit? It's actually quite simple. As they say, everyone knows about it, but no one applies it. This is especially true for intraday trading. Nobody wants to apply the simplest rule. Suppose you know that the average volatility of GBPUSD is 120 pips. Question: if the price has moved up 100 pips from the beginning of the day, should you open a buy position? The answer is obvious, we should not. Because the probability that the price will go up another number of pips is too low. Therefore, we should not open a buy position and on the contrary, we should focus on bearish positions. But for some reason people forget about this simple technique and follow their system. I believe that it is absolutely necessary to include volatility, at least on intraday strategies, in your checklist for market entry. The same can be done with higher timeframes. Let's imagine that we know that GBPUSD has an average weekly volatility of 200 pips. If the pair has moved 50 pips since Monday, we can expect that if the price continues to move down, there is a potential of about 150 pips. Of course, there are days when some movements become bigger or smaller, but we try to rely on statistics. With its help we can calculate the sizes of stops and take-outs. If we decided to be guided by the volatility data and open a sale on the pound, then we would try not to put a large (relative to the weekly timeframe) take profit. Because our expectation within the week is 150 pips. If the average volatility of a pair is 200 pips, it is silly to expect 1000 pips move. At least within a week. Thus, volatility can also be used for risk calculations. If you have opened many positions on different pairs, you can calculate what will happen if all stop-losses are triggered. Of course, the market is not obliged to obey your calculations, but it gives some support for your convenience and trading. Volatility-based Indicator The first indicator is ATR Average True Range indicator invented in 1972. It shows the average volatility and it is used most often to set targets and stop losses. The value of the indicator is multiplied by a multiplier and thus calculate the stop loss or and/or take profit. The calculations will automatically change depending on the current volatility. Volatility is higher, take profit becomes higher. Volatility is smaller and take profit becomes smaller. The next indicator is the CCI It is based on average price and moving average data. It is used as an oscillator, that is, when it is in the oversold zone, it is recommended to buy. And when it is in the overbought zone, it is recommended to sell. Another indicator, which is known to everyone, is Bollinger Bands They consist of a standard moving average and a moving average plus and minus standard deviation, which is calculated based on price. These bands are used most often to determine the limits of movement from the standard average. We can draw conclusions based on this indicator about the end of the movement, correction, etc. Conclusion In this article I have tried to give you an understanding of what volatility is in the forex market and most importantly how we can apply it in our trading. I hope that it will help you in developing and adjusting your own trading systems. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
11
INTUITION IN TRADINGWhy is it that when you feel that you should buy and you buy, the price goes down, and when you feel that you should sell, but do not open an order, the price immediately and sharply goes down? Murphy's Law? What should I do with my inner voice? Should I tell it to shut up or listen to it? In various sources, one can often find completely opposite opinions about the role of intuition in trading. Some say that only a systematic approach can bring success, while others, on the contrary, claim that it is impossible to achieve significant results without a "sixth sense". Who is right? Many people are interested in this question and we can make the most adequate conclusion: "Intuition is worth using, but only after you have gained experience of more or less successful trading within a year or two". Let's think for a second. How can a person who has no experience as a construction worker take a look at a house and immediately realize that there is "something wrong" with it? You can't. The person simply does not have enough experience, he is too poorly informed about the subject to make any judgments. There is a wonderful book by Malcolm Gladwell called Blink: The Power of Thinking Without Thinking. It deals in great detail with the "Thin-slicing Theory", what we call Intuition. I suggest you read it. So how to apply intuition in trading? The answer is simple. At first, gain experience by trading according to a mechanical system, without using any judgments like "I feel it, we are about to fall" or something like that. And only then, when you have an insight, be sure to check it with the help of technical analysis. Having found confirmation of your intuitive guess, you can already take some actions. In fact, there is even a book written on this topic, it is called "Trading from Your Gut". It is written by one of the "Turtles", Curtis Faiths. There is not so much information in this book specifically on the use of intuition, but there are a couple of useful thoughts. The less fear, the better intuition works. Perhaps this is the reason why it is so easy to make thousands of dollars on a demo account and so difficult on a real one. When trading on a demo, we release the full potential of our brain, because nothing limits our freedom, because the money is virtual and there is no fear of losing it.
Education
by DeGRAM
1
EURCHF: Buy opportunity at the bottom of the 1 year Channel DownEURCHF has turned bearish on the 1D time-frame (RSI = 31.608, MACD = -0.007, ADX = 35.082) but reached the bottom of the 1 year Channel Down pattern. Considering that the 1D RSI got oversold last week and rebounded above 30.000 this week, this constitutes a technical buy opportunity. We are aiming for the 1D MA50 (TP = 0.94500). See how our prior idea has worked: ## If you like our free content follow our profile to get more daily ideas. ## ## Comments and likes are greatly appreciated. ##
Long
by InvestingScope
1
💡December Bank of England Survey Reveals Divergent Views The most recent survey from the Bank of England Decision Maker Panel (DMP) in December is likely to maintain a division within the committee regarding the outlook on interest rates. Those leaning towards a more cautious approach will highlight the ongoing decline in inflation expectations. The 1-3 year ahead expectations, calculated on a three-month average basis, dropped by 4.3% and 3.1%, compared to the previous figures of 4.6% and 3.2%, respectively. On the contrary, proponents of a firmer monetary stance will emphasize the persistent lack of advancement in wage growth. Year-ahead expectations for wage growth increased by 0.1 percentage points to reach 5.2%. Additionally, Catherine Mann, a dissenting member with a hawkish stance who advocated for a 25 basis points hike in the December meeting, had previously highlighted concerns about price pressures originating from firms' expectations. This aspect was a crucial factor in her decision to vote in favor of higher interest rates.
Short
by Stone_Haven
AUDUSD: Market analysis strategy on I chart todayThe Australian Dollar (AUD) tries to end a losing streak on Friday. The AUD/USD pair is facing bearish pressure, even as the US Dollar (USD) lacks clear direction and China's Caixin Services PMI improved in December. Market Sentiment Weakness and widespread commodity price declines have both played a role in the Australian Dollar's weakness. Australia's Judo Bank's latest Purchasing Managers' Index (PMI) data shows a decline in business activity across both the services and manufacturing sectors, further highlighting vulnerabilities of the Australian Dollar. The Services PMI specifically showed the fastest contraction in the services sector since the third quarter of 2021. However, Matthew De Pasquale, Economist at Judo Bank, suggested that a slowdown in the economy Australia has not yet gained momentum. The US Dollar Index (DXY) holds a steady trend, showing a slight tilt towards positive sentiment and potential profits. However, a pullback of recent advances in United States (US) Treasury yields could put some pressure on the Greenback. Furthermore, upbeat jobs data released on Thursday could strengthen support for the US Dollar.
Long
by NicoTradingMaster
2
XAUUSD: Strategy for predicting gold price todayGold prices (XAU/USD) struggled to capitalize on modest intraday gains and retreated to the lower end of the day's trading range during the first half of the European session on Wednesday. The US Dollar (USD) attracted some buying activity and traded above a one-week high reached the previous day amid doubts about the Federal Reserve's ability to cut interest rates soon ( Fed). This is underpinned by a further rise in US Treasury yields, which, in turn, is seen as a key factor acting as a headwind for the non-yielding yellow metal.
OANDA:XAUUSDShort
by NicoTradingMaster
GOLD BUY NOWFrom a technical perspective, the all-time high closing, around the $2,077-2,078 region printed last Wednesday, now seems to act as an immediate barrier ahead of the $2,088 zone, or the multi-week high. Some follow-through buying should allow the Gold price to reclaim the $2,100 round-figure mark. The subsequent move up has the potential to lift the XAU/USD further towards retesting the record peak, around the $2,144 area set in early December. GOLD BUY NOW 2075 TARGET. 2080 TARGET. 2086
TVC:GOLDShort
by FxJoseph_7
A quick Top Down Analysis on the EURUSDHelo students and traders. Here is a quick top down analysis on the EURUSD. By way of summary, we have come to the realisation that this pair is Bearish on the Monthly, Bearish on the Weekly, Bullish on the Daily and 4 hour, while holding a clear bearish perspective on the 1 hour time frame. Because we believe in trading the smaller timeframe in the direction of the larger timeframe, we will want to hold on to the perspectives of the Weekly and the 1 hour charts, and will be looking to trade this pair bearish. Find out how we arrived at this perspective...
Short
by PanzyPips
XAUUSD: Gold price strategy todayGold prices (XAU/USD) have extended their correction but consolidation is likely due to light trading activity. More broadly, precious metals could continue on a positive trajectory as bets in favor of an early Federal Reserve rate cut are firming as labor market conditions ease. and a clear downward trend in core inflation. This reduces the opportunity cost of holding the yellow metal and weakens the US Dollar, on which the metal is priced. Gold prices are expected to end 2023 with an outstanding gain of more than 13.50%. Deepening expectations of the Fed starting to cut interest rates from March 2024 will also continue to attract optimism in Gold prices going into 2024. Further action for Gold prices will be guided by the Index. US ISM Manufacturing and Nonfarm Employment PMI numbers for November.
OANDA:XAUUSDShort
by NicoTradingMaster
GBPUSD Trending strategies todayThe GBP/USD pair posted modest losses in early Asian trading on Tuesday. The modest recovery in the US Dollar (USD) brings some support to the major pair. At the time of writing, GBP/USD is trading near 1.2725, down 0.04% on the day. After the US Federal Reserve's (Fed) final meeting of the year in December, Fed officials kept interest rates steady for the third straight month and signaled a series of rate cuts in 2024. when inflation falls faster than estimated. Traders are betting on sharp interest rate cuts, starting in March. According to CME Group's FedWatch tool, markets are pricing in an 88% decline in March. Data released on Friday showed the US Chicago Purchasing Managers' Index (PMI) came in at 46.9 in December from 55.8 in November, weaker than estimates of 51.0. Market participants will get more cues from the US Nonfarm Payrolls (NFP) on Friday. This number is predicted to increase by 163K in December compared to 199K previously.
Long
by NicoTradingMaster
HOW TO IDENTIFY AN ASCENDING WEDGE AND A DESCENDING WEDGEThe wedge pattern is a popular chart formation that traders use to identify potential reversals in the markets. This pattern is formed from a series of higher highs and higher lows in an ascending wedge or lower highs and lower lows in a descending wedge. As the pattern narrows, the price action becomes more compressed, eventually leading to a breakout that can result in a significant move in the opposite direction. In this article, we will look at how to identify and trade this pattern. How to identify an ascending wedge and a descending wedge Rising wedge An ascending wedge is a bullish pattern that forms when price is sandwiched between an uptrend line and a horizontal or slightly upward sloping resistance line. To identify an ascending wedge: a. Draw a trend line connecting the lower lows. b. Draw a resistance line connecting the upper highs. c. The wedge should look like a symmetrical or slightly expanding formation. Downward wedge A descending wedge is a bearish pattern that forms when price is sandwiched between a falling trend line and a horizontal or slightly downward sloping support line. To identify a descending wedge: a. Draw a trend line connecting the upper highs. b. Draw a support line connecting the lower lows. c. The wedge should look like a symmetrical or slightly expanding formation. How to trade a wedge Rising Wedge When trading a rising wedge pattern: a. Place a buy stop order above the upper resistance line, aiming for a return to or beyond the initial point of the wedge. b. Place a stop loss below the lower trend line to minimize potential losses. c. Exit the trade when price reaches the target or when the pattern does not move beyond it as expected. Downward wedge When trading a descending wedge: a. Place a sell stop order below the lower support line, aiming for a return to or beyond the initial point of the wedge. b. Place a stop loss above the upper trend line to minimize potential losses. c. Exit the trade when price reaches the target or when the pattern does not break as expected. Risk Management Trading wedge patterns can be profitable, but it is important to manage risk effectively. Consider using a fixed percentage of your account for each trade and set strict stop loss orders to protect your capital. Also, remember that no pattern is foolproof and the market can sometimes give false breakouts. Conclusion When properly identified and traded, wedge patterns can provide valuable trading opportunities. By following the steps outlined in this article, you can improve your ability to identify these patterns and capitalize on them. However, always remember that trading involves risk, and a thorough understanding of market dynamics and risk management is essential for success.
Education
by UnknownUnicorn15614419
2
SIX HABITS TO ADOPT IN 2024Trading in the financial markets can be both rewarding and challenging. However, it's essential to recognize and overcome certain bad habits that can hinder your success and well-being. In this article, we will discuss six common habits that traders should avoid and provide actionable steps to improve their mindset, performance, and overall happiness. 1. Quit Complaining – Embrace a Positive Attitude Successful traders do not wallow in self-pity or exaggerate their problems. If you find yourself complaining about your trading issues, seek help from a mentor or support group to resolve your concerns. A positive attitude will not only improve your trading results but also create a more positive atmosphere around you. 2. Monitor Your Vices and Indulgences Traders often resort to unhealthy habits, such as excessive alcohol consumption or overeating, as a way to cope with stress and disappointment. Be mindful of your weaknesses and replace harmful habits with healthier alternatives that promote well-being and mental clarity. 3. Focus on the Present Moment – Avoid Future-Tripping Fear often stems from worrying about the future. To avoid this trap, concentrate on the tasks and decisions at hand. Focusing on the present moment will give you a sense of calm, security, and fulfillment that will ultimately improve your trading performance. 4. Continue Learning and Growing Once you achieve success in trading, don't become complacent or stop learning. Continue developing your skills and exploring new trading strategies. Learning new techniques or refining existing ones will keep you engaged, motivated, and adaptable in an ever-changing market environment. 5. Cultivate Strong Social Connections As a full-time trader, it's easy to become isolated and withdrawn from social interactions. Make an effort to maintain and build meaningful relationships with family, friends, and colleagues. Strong social connections will provide emotional support, reduce stress, and contribute to your overall happiness and well-being. 6. Practice Gratitude and Kindness Traders who experience negative emotions, such as envy or resentment, can benefit from practicing gratitude and acts of kindness. By expressing gratitude, volunteering, or offering compliments, you will improve your own happiness while fostering a positive atmosphere around you. Conclusion By recognizing and overcoming these six common bad habits, traders can significantly improve their well-being, trading performance, and overall happiness. Embrace a positive mindset, maintain healthy habits, focus on the present moment, continue learning and growing, cultivate strong social connections, and practice gratitude and kindness. By doing so, you will be well on your way to achieving success in the financial markets and leading a fulfilling life. In 2024, may traders who have yet to find success in the market be blessed with the wisdom to learn from their mistakes and the courage to embrace new strategies. May they cultivate a growth mindset, forging strong connections, and practicing gratitude and kindness. As the year unfolds, let their resilience and determination guide them towards a prosperous and fulfilling future in the world of trading. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
10
EURUSD: Structure Based Trade Explained 🇪🇺🇺🇸 EURUSD is testing a wide daily horizontal demand area. The price is currently ranging on an hourly time frame. A bullish breakout of the resistance of the range - an hourly candle close above 1.1085 - will be your solid bullish confirmation. A bullish continuation will be anticipated at least to 1.1106 level then. If the price drops lower, the setup will become invalid. ❤️Please, support my work with like, thank you!❤️
Long
by VasilyTrader
3