Low volatility trading

22 Dec

imagesEven the most well trained trader with the best Forex trading system will not be able to gain significant profits if the market is flat. In this article, we will discuss how to trade when the markets are traded in low range. The main problem with a flat market is that currencies are traded in a narrow range and it is much harder to reach the TP target. During trading sessions with low ranges, traders tend to trade in larger amounts than they normally would. This causes overtrading and causes the trader to lose control.

How to spot low-range trading sessions

One should anticipate trading session that may be low-ranged. Such trading sessions usually occur during holiday seasons, Independence Day, Sylvester etc.  Likewise, markets tend to be traded in a low range after a trading session with higher volatility than usual. A trader should be aware of signals that may indicate low volatility in the markets so that they can react properly.

Reduce sizes & trade volatile pairs

Trading currencies when the markets are trading in low volatility can be dangerous. Therefore, some traders tend to take a day off when they feel that the market is not going to produce a significant movement. However, it is possible to trade currencies in such market conditions but it has to be done with extra care. The first thing to do in order to minimize the risk is to trade currencies with lower sizes than you usually do. This will naturally reduce the potential profit, but at the same time, it will protect your cash balance.

Another option is to concentrate on pairs that are traditionally more volatile than other pairs. Such pairs might be EUR/NZD, GBP/NZD, GBP/CAD and other exotic pairs. In times of low volatility, these pairs are traded in lower volatility but still may produce a significant range of pips.

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