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I'm sure that most of you guys are exasperated about the current never-ending low volatility environment(see Figure 1) as current market conditions has become increasingly challenging. The Forex Exchange market has been in a very deep sleep for the most part of this year and swing trading opportunities have vanished away and that's one of the reasons why in current low volatility environment the Carry Trading Strategy are preferred more as it makes sense that investors who are chasing yield to rush in and park their money with high yield currencies in seek for return, you can read more about this in my previous article here: Carry Trade Returns
Before going any further we need to define "Volatility", and the way I like to look at it is from two key perspective:
  1. How many times it moves(up and down) in a given period of time --> Frequency.
  2. How faster and bold is the move-->Severity.
In this regard the best definition of volatility I found it to be:"Volatility refers to the frequency and severity with which the market price of an investment fluctuates."
Figure 1. JPMorgan global-currency volatility index.

  • Why is Volatility so Low
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    gino32 avatar
    gino32 22 Sep.

    Likerty are you talking about VSA accumulation (wyckoff market cycle)?

    gino32 avatar
    gino32 23 Sep.

    Daytrader21 well what i think of low vol periods its simple "calm before the storm" meaning possible breaks may happen so search for technical that chart you have a clear break, supported with 1y clear bond rate differential divergence..

    Daytrader21 avatar

    gino32 That's correct because volatility tends to revert to the means. However volatility is greatest at turning point and tend to vanish as the trend develops.

    OneGoodTrade avatar

    The topic deserves one article by itself...what is volatility exactly. Good work.

    Daytrader21 avatar

    OneGoodTrade I already answered your question and article gives an comprehensive definition of volatility. You're right, there are many more things to be written about volatility but my article focuses only on the low volatility environment and how to profit from it.

    orto leave comments
    Moving Averages (MA) are among the most popular indicators used in forex trading. However, they are inherently a lagging indicator and are always behind current price action. Traders often use various tactics to try to get around this lag, but in 99% of the cases, this is like trying to hold back the sea. Death CrossOne of the most common uses of moving averages is using short/long term MA crossover, and one of the most often quoted uses is the so called "death cross". A death cross occurs when the long term MA crosses above the short term MA. In the following chart, a 50 MA (red) crossed up and over a 10 MA (blue).The most famous death cross is the S&P500 200MA crossing the 50MA. Traders have arbitrarily assigned fantastic meaning to the cross because it has preceded two of the biggest market loses in history. However, that does not mean it will always do so. After all, on July 1st of 2010 after dropping 209 points, the death cross downward occurred and the S&P promptly shot northward, gaining 365 points. Then again on August 12th 2011 there was another death cross downward, and price is nearly back to levels associated with that cross.All CrossesTrading all crossovers is not nece…
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    ikhall avatar
    ikhall 15 Dec.

    kishere, you are correct if you are looking to hunt small gains. This trade set up is for longer term trades that you expect to run for a while.

    MyiDEA avatar
    MyiDEA 18 Dec.

    Article contest good for learning...good wishes for this competition...

    doctortyby avatar
    doctortyby 18 Dec.

    good introduction, but I'm expecting more information, maybe another article +!

    skytrader avatar
    skytrader 18 Dec.

    do you trade the averages in your daily trading? if yes, in which time frames? to me the averages are a substantial way to read the markets! of course you will also be stopped ut, but usually in a trending market it is almost impossible to burn the fingers with a good MM or RM!

    ikhall avatar
    ikhall 19 Dec.

    Thanks guys! sky: I watch 5 min and 15 for trade entry and management, 1 hr and day for management. doc: I plan on following up with more.

    orto leave comments