FOREX THEORY
Volatility, Not Volume
You’ll notice that unlike trading
stocks or futures, there is no way for you to see the volume of trades made in
the forex market.
With stock or future trades,
volume is essential for making good breakout trades so not having this data
available in the forex leaves us at a disadvantage.
Because of this disadvantage, we
have to rely not only on good risk management, but also on certain criteria in
order to position ourselves for a good potential breakout.
If there is large price movement
within a short amount of time then volatility would be considered high.
On the other hand, if there is
relatively little movement in a short period of time then volatility would be
considered low.
While it’s tempting to get in the
market when it is moving faster than a speeding bullet, you will often find
yourself more stressed and anxious; making bad decisions as your money goes in
and then goes right back out.
This high volatility is what
attracts a lot of forex traders, but it’s this same volatility that kills a lot
of them as well.
The goal here is to use volatility
to your advantage.
Rather than following the herd and
trying to jump in when the market is super volatile, it would be better to look
for currency pairs with volatility that is very low.
This way, you can position
yourself and be ready for when a breakout occurs and volatility skyrockets!
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