image source:

How to Trade in a Low Volatility Market

Have you ever heard of the phrase that ‘The trend is your friend’? Most probably yes if you are a trader. The trend is simply the movement of a financial instrument which may be in the upward, downward or sideways. Traders use trends to know what is going on in the currency market and what is the current demand of a currency pair. Due to currency correlation, trends play a big role to speculate the movement of any currency pair.

Now no matter how many tools you may use, we have to admit that humans are to make mistakes. And these mistakes can prove to be detrimental to the traders. Investors in the United Kingdom usually make such mistakes when the market moves uncertainly and frequently at the same time. This results in an amplification of indecision among the traders. Most of the traders suffer to take the right decision in their trade at some point in their career. The reasons behind such indecision may be fear to lose or ambition to make more money. Again, many traders are simply influenced by others in making decisions. But no matter what, such indecision never turns out to be good for the traders and traders may encounter a loss in their trade.

For that reason, when you are trading, you should try to look at a bigger picture instead of focusing on the small details. Though such detailed information can help you to understand the market better, it is still useless and confusing when you are looking for a long-term position. Instead, you can use a low volatility chart to identify the best levels for executing your trades. Low volatality can provide powerful trade signals for the big lot trades. But to take advantage of the low volatility, you must learn to analyse the price action signals. Without using the price action signals, it will become really hard to boost up the profit. Once you learn analyse the price action signals, it will be an easy task to set the perfect stop loss in any market.

Market volatility

Image source:

The low volatility charts or higher time frame charts reduce the price fluctuation by many folds and maintains consistency in the price range over a long period. So, when you are trying to make a decision, you don’t need to be influenced by the rapid price changes. You can also avoid having any regrets regarding your trading. Why? When you are in front of a monitor where you are constantly looking for opportunities to execute your trade, you might feel a sense of greed to wait a bit more to make a profit. Since the time needed for such fluctuation is very less, you might feel tempted to wait a bit more before making any profit. But here’s the problem, the trend will only be your friend until it ends. Visit the official site of Saxo and get a demo account so that you can learn about the trend in the risk free environment.

While you are waiting for the best opportunity, the trend may change. Now you may say, how can a trend change so fast? Well, trends change at the speed of light. You may see an uptrend and go to sleep thinking that the market will go higher. But you may wake up to see a downtrend. Nothing is impossible here. Thus, using a lower time frame with higher volatility can increase your risks of losing trades. However, if you manage to learn multiple time frame analysis, you can expect to make decent result in any time frame. But the rookies should start trading the market in higher time frame to avoid getting hit by the false spikes.

For trading with the minimal risk, you can have a higher time frame as the best option. Though you may not have as many opportunities you had in a lower time frame, it is still better if you can pull off all your trades properly. After all, smaller losses are always better than bigger losses.

You can take a break

Image source:

Trading in low volatility helps you to work flexibly without having any stress to monitor the charts 24/7. As it helps to keep a trader less stressful, one can take his sweet time to make more efficient plans for his trade. You can’t make millions of dollar broker by trading 24 hours a day. In fact, this will cause overtrading problem. The market might offer decent profit taking opportunity 24 hours a day but this doesn’t mean you will not take any break. You need to spend more time to deal with the critical market dynamics and only then you can expect to become a professional trader within a short time.

Using strategies

Image source:

In lower high frames, you get a little scope of using strategies as there is little time and all your focus remains on the numbers. But in higher time frames, traders need to be a strategist to get the best from their trades. So, if you are a mind gamer, this will be a new opportunity to play all your hidden cards. Smart traders knows the proper way to control their emotions. They never rely on aggressive attitude or trading method since they know it won’t help them to earn more money in the most volatile state. To protect your capital, you should use a simple strategy while dealing with the low volatile state of the trading instrument.

Despite all the usefulness and drooling facilities, you can’t expect the trading market to be comfortable and stressless. You need to pay it well till the end to get better and more fruitful results; be it in a high volatility market or low volatility market. Volatility won’t be a major factor when you start focusing on the important market metrics. Once you become extremely skilled in evaluating the risk profile, you will slowly become an independent trader. And always remember, the risk factor must be low when you deal with the low volatility of the asset.

About Suzan Vega