Volatility And Trading

Traders often have problems when the market's volatility changes. Traders who look for significant drives or trends will find their profits shrink as the markets become less volatile. These traders often use tighter stops which require larger wins to offset a lower winning percentage. Traders who look for more reversion plays or small chops will quickly find that the size they trade during low volatility markets isn't appropriate as the market becomes more volatile. As well, these traders may find that stop levels that were previously reasonable become prone to getting hit.

The lesson: There are opportunities in both high and low volatility markets but traders need to keep in mind the current volatility and recent ranges for their markets and be prepared to cut down size and even adapt trading style when the volatility changes.



Wednesday, February 27, 2013 12:58:00 PM Categories: education


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Risk Disclosure:

Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure:

Hypothetical performance results have many inherent limitations, some of which are described below. no representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.