Volatility is the single factor that can have you netting hundreds of pips due to some Central bank statement, or that can have you pulling your hair out while your stop loss is triggered within seconds. Volatility is the difference between making tens of pips within minutes and having your trading funds tied down in trades that don’t want to go anywhere. Trading the FX markets can be summed up in two concepts: trade in the direction of volatility, and respect supports and resistance. I recently read about the Turtles, the “great Richard Dennis experiment”; and it was interesting to note that one of the reasons for their success was knowing “when to trade”. The forex market is a 24-hour, weekday market, so the general impression is that the market is always “moving” during those times. It is expected that such a large market with high liquidity should always give trading opportunities with large price movements. The reverse is the case. The markets actually trend 30% of the time (according to some book I read), while at other times it is in consolidation. This means our chances of getting large price movements are as high as we initially thought. Exploiting Volatility A volatile …
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