Golden Tips for Trading Forex During Volatile Markets

Volatility almost means the same thing to a forex trader as traffic is to a motorist.It simply means market condition.The condition could be one of the following three states;
-- high volatility
-- stable
-- low volatility
Volatility is market phenomenon that varies significantly with time and events.

Traders who can identify the market condition at any instant may record more profits and success from time to time.

A typical example of high volatility was the legendary  Swiss franc scenario in 2015.It was due to the move by the Swiss monetary authority, the Swiss National Bank, to unpeg the  Swiss franc to the euro ahead of the European Central Bank’s decision to use quantitative easing policies. Traders usually considered  Swiss franc a stable currency and they believed it to be  “safe haven” for investment. In contrast, it shifted about 40% against the euro in a matter of seconds.          This prompted losses in the local stock market, export and local services markets, and for many in the currency market who were not warily positioned.                                                                 It is uncommon to see a sudden move of a normally stable currency like the Swiss franc and Euro. However, sudden moves characterize many unstable currencies where the countries are less stable politically and economically.

A simple technical tool to measure market volatility is the bollinger bands. The volatility is high when the outer bands expand and it is low when they contract.  Others are RSI and ATR.

In high volatility, the currencies may trade within a range for a while, but they will be more

 susceptible  to breakouts and random oscillations. Usually, a price breakout from a range tends to show that a trend is established or it may mean that the prevailing trend is sustained. However, in volatile markets, things are not that easy. Prices can move rapidly and suddenly that  traders  are put at risk that their trade cannot be executed at the entry or stop loss prices. That is slippage  occurs more often than not during high volatility. Most trading strategies  are designed to function optimally under  low or stable volatility. Hence, they  may require some adjustments to reduce risks and enhance profitability during the rush.