Becoming a successful trader has been very difficult, and therefore to obtain a stable income from currency speculation needs more than one year of experience.The development of the financial markets - is the introduction to macroeconomics, the study of technical analysis and work on yourself.However, the most important is to create a trading strategy that will not work at 100%, if the trader does not know how to analyze and use the volatility.
What is volatility
Mastering trading, you are looking for answers to many questions, among which are bound to have a base: "Volatility - what's that?"It determines the number of points that the price has passed for some time.For example, one day the quotation EUR / USD may rise or fall by 80-100 points - this is the size of its volatility.Being in the market, it is no wonder this movement: change of the currency pair 140 points - this change in the price of the euro against the dollar by 1%.
analyzed the fluctuation of a financial instrument - this volatility, the definition of which is important for successful trading.If this ratio is high, the trader must understand that the probability of profit increases in accordance with the risk.The reverse situation - when the graph is observed flat, and the volatility of 5-15 points.In such circumstances, work comfortably scalpers.At the middle and high volatility convenient to draw trend lines and make forecasts of price movements of financial instruments.
What affects the volatility
price volatility varies for several reasons:
- activity of market participants. sharp price fluctuations occur when buyers and sellers are fighting for a deal.Thus, a trend upward or downward, depending on who wins this fight.
- release of macroeconomic statistics. The economic calendar contains the most important economic events of the developed countries: the output data on production, labor markets, changes in interest rates.The difference between the actual performance of the projected causes violent reaction of traders, which justifies the increasing volatility.
- trading session. Most transactions are concluded in the first half of the day, when the opening of the London Stock Exchange - in this period there is a maximum volatility of most financial instruments.In US trading session traders are less active if there is no macroeconomic news.During the Asian and Pacific session is increased volatility in the currency pairs, in which there is the Japanese yen, the Australian and New Zealand dollar.
- general state of the economy. All countries cooperate with each other, which leads to their influence on each other.For example, investing their money in the Australian dollar, keep in mind that it is very susceptible to negative changes in the Chinese economy, as these two countries are close partners.Lead to the fall of the New Zealand dollar may be drought, as the economy of the state is based on the sale of agricultural products.Thus, the volatility of the currency is determined by the fundamental techniques that cover all: results of negotiations of Heads of State, minutes of meetings of central banks, the crisis in any industry, natural disasters and so on.
Features volatility
to build a successful trading strategy is discussed in detail with the concept of "volatility".What is this, what characteristics it has.Firstly, it is inherent permanence - most volatility does not change for a long time, until there is really a significant economic event.Thus, analyzing the calendar leaving statistics, we can assume that price fluctuations EUR / USD pair will change its range before the Nonfarm payrolls.
Second, the cyclical volatility - sharp fluctuations are replaced by minor changes in prices, after which there again surges caused by certain fundamental factors.Third, the volatility of the option, or currency pair often tends to mean.For example, if the USD / JPY pair is characterized by a day pass 80 points, to this value, it will come back every time you reach new extremes.
value volatility
Understanding volatility - it is and how to use it in their trading, a trader can improve their chances of making a profit, as it will be more attentive to the choice of the point of entry into the market.Volatility helps calculate the level of risk of the proposed transaction, as you need to see the approximate boundaries of the current price movement.This gives a clear understanding of where you want to be protective order, and where the position will be closed at a profit.
trader must be aware that the most volatile financial instruments provide more opportunities to make money, however, and the risks in such transactions increased significantly.Newcomers better to choose the "quiet" currency pairs to learn how to analyze the changes in volatility, weed out market noise and spurious signals, after which you can make your trading more aggressive tactics.
As independently calculate volatility
volatility calculation is very simple, look at it as an example.A trader sells within days, I must know how many items the price can go for an hour and per day.For this purpose it is necessary to analyze the history of behavior considered a financial instrument.To simplify the procedure, he opens the weekly chart and finds the difference between High and Low values last closed candles.This value it is necessary to divide by 5 to determine the amount of points that the price has overcome per night.To see hourly volatility, the value is divided by 120 (5 * 24).
If the trader will celebrate this statistic, then soon he will be able to see some changes in the pattern of volatility to determine the standard average range of motion for the price of financial instruments, which will greatly facilitate its work and will help to improve the trading strategy.
volatility indicators
indicators to determine the strength of volatility are the standard is in the terminal.The easiest option - it is exponential moving averages.The farther away from the candles is the line, the greater the volatility of the currency pair.Competition moving averages Bollinger.This indicator of volatility represents several lines converge, if the rate is low, and the divergent while increasing the range of price fluctuations.
third option of calculating volatility - is ATR, which is to build your image using the price difference (current maximum and minimum).The higher the number, the greater the volatility.The graph shows the ATR is not a trend, and the increase or decrease in the rate of price change.Each of these indicators can be set up on the basis of their views to the analyzed data were the most accurate.
use volatility to profit from the financial markets, it is important to correctly use changes in volatility.Its increase not only increases potential profit, but also risks.For beginners it is best to choose the currency pairs whose graphs do not illustrate the surges uniquely knocks inexperienced traders out of the market.To correctly use the volatility, it is necessary to know the following:
- If the chart there is flat, and the range of price fluctuations for a long time remains unchanged, then we can expect that in the near future volatility rise sharply.Carefully review the economic calendar to set pending orders in a timely manner.
- trading system must take into account changes in the behavior of financial instrument - "Stop Loss" should be placed outside the area of noise and taking into account the possible increase in volatility - this will eliminate the possibility that you simply "knock out" of the market.For example, selling EUR against the USD, carefully choose the level at which a protective order will be located - in the range of 80 points.If the price at the time of the London or US session, rose or fell by a given number of points, then the day is not worth it to open a position.Also remember that the potential profit should be at least 2 times more losses.
- With high volatility reduces the amount of opened deals - do not risk your capital unnecessarily.
adjusting its trading strategy, taking into account the information received, you will be able to screen out most false signals and find a really good entry point into the market.Wondering: "Volatility - what's that?", You should not be satisfied with only one definition of the term.The ability to analyze it and apply to their trade - the key to increased revenue from the financial markets.
