The Forex market is extremely volatile. At times the volatility becomes so high that it becomes nearly impossible for the retail traders to trade the market. But those who are skilled uses the market volatility in their favor and execute the trades with strong confidence. To become a successful trader you must learn to trade during volatility. You might be thinking that it will be an easy task but in reality, it is one of the most difficult tasks in the world. Even after having strong analytical knowledge, you might have to ignore the quality trade signals during the intense volatility.
You can’t find any fixed rules to trade the market during volatility. But if you do the digging, you will notice some advanced technology that will let you execute trades in the volatile state of the market. So, let’s learn the process of trading the volatile market.
Find a good broker
The first thing which you need to consider is the quality of the trading platform. If you wish to trade during the volatility, you must trade the market with a good broker. People who trade the market with the low-end broker often faces freezing platform issue. Moreover, the spread will be very high and it will be really hard to execute the trades at the right price. To avoid such hassle, you need to do some research on the market data and find a good broker Saxo.
Unless you find such a broker, you should only trade in the stable hours of the market. As you become more experienced, you will slowly realize why the pro traders always trade with the high-end brokers.
Trade the higher time frame
The professional traders never trade the lower time frame during the intense volatility. By choosing the higher time frame, you should be able to reduce the insane spikes in the futures market. However, to execute the trades you might have to move to the lower time frame since you need to know about the price mechanism for that particular period. To study the price mechanism, you have to learn the price action trading skills. Once you become good at price action trading strategy, you should be able to make a regular profit without having any major problems.
Learn price action trading skills
Setting up the stop loss during the volatile state of the market is one of the most difficult tasks. But if you learn about the Japanese candlestick pattern, you should be able to execute the trades systematically. By using the formation of the candlestick pattern, you can place your trade and execute the trades with a high level of precision. At times you might get frustrated during the learning process of the price action trading method.
To overcome the frustration, you should take a small break from your trading career. Never think you can master price action trading skills within a short time. It might take years to know the basics of the Japanese candlestick pattern. But if you devote yourself, you should be able to master price action trading skills within six months.
Trade with low risk
During the trade execution process, you should be prepared to deal with the worst-case scenario. Though the profit factor is high in the volatile state, the risk factor is also high. So, try not to risk more than 2% of your account balance. If you increase the risk factor by over 2%, you are going to lose money most of the time. You will be under heavy stress.
At the initial stage, it better to risk 1% of the account balance and you must be prepared to deal with the loss. And maintain a 1:4+ risk to reward ratio. If the risk-reward ratio is less than that, you should ignore the trade signals. There is no reason to risk your account balance if the risk to reward ratio 1:2 or less.