I appreciate volatility as it created great trading opportunities, but a growing number of traders seem to hate it. I have one question for those who hate volatile markets (not just forex, but financial markets in general):
Why do you bother trading?
can you share a couple of such high volatility situations that create opportunities, together with the relative - hi res. if possible - charts please?
Thanks in advance
Pick any chart and you can see what I mean plus it all depends on your trading strategy. Volatility moves markets violently and therefore creates plenty of great entry/exit opportunities or trades in general. As a trader (at least in my opinion) you love volatility as it comes with profits if you know what you are doing.
I think those who hate volatility fall into three ps. One. I hate volatility because no matter what I do I can’t win. There is no logic. One time mixed results from economic calendar says price should drop, but then it jumps up. The next time is does what it’s suppose to. How can you win? How do get your entries and exits right as to not leave pips on the table.
Two. I hate volatility because volatility is controlled by institutional traders and it’s designed to keep retail traders losing their money and institutional traders making more money. And because they make the reasons up for change one way or another it can be hard to analyse, compared to a trending market of say 4 higher highs and four higher lows.
Third reason why traders hate volatility is because the reasons for it can be complicated so they trade around it I think these traders are more interested in picking profit instead of tops and bottoms.
I’m not sure how you come to if you hate volatility you shouldn’t be trading. Me personally I hate volatility and trade around the things I see cause it and I love trading, wouldn’t do anything else and wish I would have started 30 years ago. But again that’s me and my opinion
obviously i’m looking for the winning path through the violent volatility’s bumpy road; wouldn’t join the chat by asking for examples if i “knew what i was doing”…
thanks
Thanks for your input gb. Different traders have different opinions and approaches and they can all be profitable. That’s how markets are created.
In that case you might be better off with a less volatility approach until you acquire more knowledge or you get your trading platform dirty and start to figure it out. That’s the best way to learn in my opinion.
add +1 to my like
don’t mean to be rude but your answer is truly [B]vague[/B] and adds nothing to anyone’s knowledge.
smth a bit more [B]specific[/B]:
[B][U]1. [/U][/B]Volatility in the time frame he uses to trade is wishful for every trader.
e.g. we all wish and appreciate a nice pullback of 50 or 61.8 on the fib scale after a new high or a new low, yet this is not happening as often as we may wish and price action besides from boring becomes truly hateful, for -another- example, who wouldn’t wish to have jumped onto the cable’s free fall by catching a nice retracement, that didn’t happen, same for the skyrocketed aud/nzd (<-caution: appears signs of explosion in H4)
[B][U]2. [/U][/B]volatility during news, announcements etc. where price jumps up and down beyond the traded contract’s ATR is useless for trading and is only good for gambling.
that’s when one can spare some small yet still protected amount in either direction and wait to get lucky
in spite of any subjectivity i hope the above make some sense and draw some significant lines on the volatility issue
If you don’t mind here’s my 2 cents. If you read his previous post, [I]" Thanks for your input gb. Different traders have different opinions and approaches and they can all be profitable."[/I]
is the answer.
I agree with you on both your points. Every morning every trader starts their day wishing for the magical trend that someone used when illustrating a trading method. Your reference to finonacci was right on the3 money. I agree it does not happen in that way. So what the TLB said is true; traders have to approach volatility differently.
I trade full time, so I trade opportunity I don’t care if its a short term trade or long. Depending on how I’m trading volatility will have different degrees of importance to me in my analysis. I avoid volatility around announcements by not trading 30 minutes before or after the major and medium announcements. Those spikes are caused by institutional traders and they want you to buy when their selling and sell when their buying. There is no safe way to analyze those spikes until after all announcements are done. If you’re trading longer term, then spikes and volatility doesn’t matter as much if you’re trading intra day for example. Anyhow hope that helps
Gp
I trade based on facts(fundamentals) and non time frame charts. Volatility is a term used by traders who are subject to market noise and it literally can’t effect my trading methods. There could be 3 traders left in the world. 1 bull. 1 bear. And me. I’d make money. If volatility effects your trades…good luck!
Just wondering if you can expand on this point a little more. Do you see this as a market myth as I interpret it.
To me the reality is most institutes don’t give a rats ass about us speculators. All we add is liquidity (and even then not much of that) not volatility and as this thread suggests volatility is where money is to be made.
Personally I like volatility because there are plenty of opportunities to extract pips from the markets which to me beats the crap out of trying to analyze the market
Nothing wrong with your opinion that institutes don’t give a rats ass about speculators. As long as you come to it looking at relevant facts and options and doesn’t parade it as fact (which you haven’t). In my opinion as a business owner all my life, most businessman care about all profit big or small.
It may also depend on someone ‘s definition of institution. In my definition there are two sides to a trade. Me and those who agree with me or I agree with, and everyone else falls under my definition of institutional trader. Having said that, I think retail speculators are important source of income for institutional traders for many reasons, but if nothing else, the simple reason if they aren’t why do institutions offer so many free resources in order to get you to open an live account.
I’m not sure what sources you’re getting your information from that would lead you to interpret that institutional: traders, banks, hedge funds, brokers etc. and other market makers don’t control and can manipulate the forex. All you have to do is to look at any broker who is a market maker. That is not the only way they make money, but it is certainly one of the ways by taking the other side of the trade. Of course this is not true, but again look at any financial news and it seems like every other day some broker, bank or other institution is being fined for manipulating or trying to manipulate the markets. As well how many times have you seen based on the numbers, descriptions or events that the trade should move one way but goes the complete opposite.
If you read the TLB original post his question was if a retail traders hate volatility why do they bother trading. Subsequent posts were other traders expressing their opinions that there is more than one way to analyze information concerning a trade.
Have a listen to this video; 1st 4 minutes is more about the presenter, but after 4 minutes the next 10 are what I suggest you listen to. YouTube
Hope this helps
Gp
Thanks Gp for the video.
I’ve always asked myself "how should I trade these markup,distribution,markdown?"
What is the general consensus ?
No problem. Read and learn the phases in this pdf, Then you take a look at this guide and then use them to see what phase the currency pair you want to trade is in. The more you do it the better you get at it. Make sure to use something else to confirm. For example I use a 30EMA and 60 SMA cross. If price is above the 30 and 60 averages and the pair is in the Accumulation Phase I would only be looking for longs. If price was below the 60 and 30 ma’s and the pair is in the distribution phase I would only be looking for shorts. You could also confirm markup markdown with RSI, Stochastics, MACD etc. I use the MFI (Money flow index) Point is like everything confirm your VSA with other forms of analysis or indicators.
Good Luck
Gp
VSA BASICS.pdf (665 KB)
Here’s the guide I used for VSA
I pull up a currency pair and compare it to this guide. If I look to the left of the currency pair I want to trade, I’m looking to see what phase it has just completed. The more you do it the better you get
Thanks my friend but you lost me at VSA. Unfortunately we see very different charts. Yours are time base, my are tick (volume) base. And that’s good. It demonstrates that the is no singular way to interpret the markets. Only your way. But you will note that on another thread I talk a lot about a specific box pattern formation which strength can be confirmed by the number of candles in its construction. This is very similar to like a pin bar or doji bar forming with a large volume attached. So we might not see things that differently at all.
Just to bring my view into perspective. As a business man. 20% of my customer base generates 80% of my income. 20 to 40% of my client base could be infact unprofitable. It more productive to work with my current client base than go out and obtain new ones (Philip Kotler Marketing 8e, 2010)
With this in mind, any organization that has the power to adjust the spread to its clients is by my definition a Money Maker. Now we have the two types, the institutes (Banks, Hedge Funds etc) or wholesale Money Maker and the Retail Foreign Exchange Dealers (your local broker) retail Money Maker. So in your statement
volatility is controlled by institutional traders and it’s designed to keep retail traders losing their money and institutional traders making moremoney.
to me is wrong because “we” speculators (retail traders) do not form “their” client base. Institutes make money in a completely different way to what we (speculators) do and that’s important to remember. And that’s good because their very actions creates market volatility which leaves its evidence behind as price action on yours and my charts which we then place a bet on with our local broker.
Your local broker however does care a great deal about you as you are how he is going to generate his income. Dealer desk, STP, ECN who cares they are all Money Makers. If your don’t like your local brokers service or activities, close your account and find another one.
I’m with TLB, volatility is just market evidence of institutional traders going about their business.That evidence which you and I can identify on our charts offers us speculators opportunity. It is something that should not be feared. It needs to be understood and then used to our advantage when speculating. If you fear or don’t understand volatility then there’s every chance your broker will leave you on his “B” books and your losses becomes his profits.
I don’t hate volatility…I hope it returns in the markets. Not much that you can do in a low volatility environment.
If you don’t want to wait for volatility, try this: Use a Bollinger Band Indicator Go short when price bounces off upper band, go long when it bounces off lower. Great for ranging markets and helps to recognize breakouts. I use this on 15 - 30 minute time frames. Make sure price is bouncing not hugging either band. As well make sure there is between 100-200 pip spread if you’re using 5 digit price or 10-20 pip spread if you’re using 4 digit price. Confirm with a 30 period EMA or your favorite momentum indicator, I use MFI, but Stoch, RSI, etc.
Just so we’re clear, there is nothing wrong with waiting either for volatility to return. Waiting is good practice for patience and discipline.
Hope that helps
Gp
You are aware the cable has neared 3 years highs of volatility this month right?
We do need volatility in order to make money. Too much is bad, to little too.
