Forex Trading has been a thriving industry because of its high profits in no time, but this doesn’t make it a risk-free business. The greater risk comes with the significant investment, and it is not icing on the cake for traders. They need to counter this risk of going in the loss by any means.
Most of the risks faced by traders in forex trading can be avoided if traded smartly, but sometimes loss becomes inevitable, but this is the part of the business. No business in this world is risk-free.
Volatility is one of the factors that make this business a risky one. The volatile nature of any currency makes it underperforming, uncertain, and unstable. Hence, most traders seek to escape by avoiding trading in highly volatile currencies, but sometimes things worsen.
There comes such a situation where you are exposed to a volatile market, and you have to trade anyhow. There are many factors of this occurrence. It can be any country’s internal matters, economy, and foreign policy.
Besides this, it also depends on the trader. His lack of knowledge and inexperience can make him buy volatile currencies. Sometimes, a global market crash can make the coins more volatile than ever before.
This article will cover the strategy of how to trade how account registration is done when there is high volatility in currencies in a forex market. We try to cover such plans to avoid high risks even if exposed to a volatile market.
There are two types of volatilities.
1. Historical volatility (which means this volatility had occurred in the past with a particular currency, and by observing this, one can predict the period of volatility)
2. Implied Volatility (This is the second type of volatility, and this type of volatility is an intelligent guess of experts, based on their experience and expertise, they can predict the upcoming volatility of any currency)
Generally, there are three ways to trade even during a volatile market.
Bollinger Bands Bollinger bands are indicators, technical analysis indicators widely used by traders. John Bollinger first developed this indicator to find relative highs and lows in dynamic markets. The indicator comprises an upper, lower, and moving average line. The two trading bands are two standard deviations above and below the moving average (usually 20). Using two standard deviations estimates that 95% of price data will be contained within the two bands.
Average True Range (ATR) is a tool used in technical analysis to measure volatility. This indicator does not provide an implication for the direction of the price trend. It simply measures the degree of price volatility from high to low for the day.
RSI (Relative Strength Index) is counted among trading’s most popular indicators. This is for a good reason because RSI can help us determine the trend, time entries, and more as a member of the oscillator family.
J. Welles Wilder developed the Relative Strength Index (RSI) to measure the speed and change of price movements. RSI oscillates and is bound between zero and 100. There are many different uses for RSI, and by far, the most popular is trading overbought and oversold crossovers.
Read Also: 10 Golden Guidelines on Trading via Forex Signals