Forex Trading Tips & Stratgies
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2. Bollinger Bands
Volatility is often viewed as a negative in that it represents uncertainty and risk. However, higher volatility usually makes Forex trading more attractive to the market players. Volatility does not imply direction.
It just describes the level of fluctuations moves of an exchange rate. A currency pair that is more volatile is likely to increase or decrease in value more than one that is less volatile. Volatility of a currency pair changes over time. There are some periods when prices go up and down quickly high volatility , while during other times they might not seem to move at all low volatility.
Social Team We are the easy social team. Commonly, the higher the volatility, the riskier the trading of the currency pair is. Forex volatility for market players Volatility is often viewed as a negative in that it represents uncertainty and risk. Volatility over time Volatility of a currency pair changes over time. Was this article helpful? More in Education Read More. Where Do We Stand? Dollar poised for winning week on March Fed rate hike Education Nima.
The opposite is true, and high volatility tends to breed much of the same. Mean reversion is similarly easy to understand: Instead we see that periods of especially slow market movement are often followed by a reversion to the mean—fast-moving markets typically follow as volatility remains near its long-term average. These two simple concepts in volatility tell us two key things: Yet that leaves us looking for a catalyst.
What could force volatility sharply higher? We see a number of obvious potential sources of a sharp jump in financial market and FX volatility. Currently the fear we see in markets is underperformance.
And yet fear could manifest itself quite rapidly in the opposite direction: Currency moves in that instance tell a clear story: Absent a significant change in conditions we need to remain realistic about trading strategies and currency trends. Going long the US Dollar is an obvious choice if you believe volatility will jump. Our retail FX trader positioning data likewise shows the perils of buying into a clear downtrend. Until sentiment shifts we see little reason to call for an important price reversal, and indeed our proprietary retail data has given steady contrarian signal to stay short USD.
In concrete terms this means that the US Dollar remains a sell against major counterparts. And yet it remains similarly important to keep a close eye on broader markets; conditions can and likely will change quite rapidly. Our Senior Strategist notes that volatility in the G10 FX space could potentially return with a vengeance headed into the coming months based on key long-term timing relationships. Written by David Rodriguez, Quantitative Strategist. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
A demo account is intended to familiarize you with the tools and features of our trading platforms and to facilitate the testing of trading strategies in a risk-free environment. Results achieved on the demo account are hypothetical and no representation is made that any account will or is likely to achieve actual profits or losses similar to those achieved in the demo account.
Conditions in the demo account cannot always reasonably reflect all of the market conditions that may affect pricing and execution in a live trading environment. Alignment of Forces Keeps Yen Weak.