Forex Market Volatility - A Survival Guide
Trade Forex Zen
02 September, 2014
Volatility on the foreign exchange market is no stranger and some economic circumstances can lead to particular and unprecedented volatility. If you find yourself engulfed in a sudden forex market storm then you should follow the below essential safety practices to reduce risk and protect your forex trading account
Chart an FX Strategy that Avoids obstacles
A clear forex trading strategy is the key to a successful FX trading career. It enables you to stay focused and organised through every market condition, even extreme volatility.
During extreme volatility you should reduce the amount of currency pairs you are trading with to one or two, and should thoroughly research the factors that impact exchange rates for these currencies, by following forex news and staying up to date with economic announcements. You should also continue with technical analysis, particularly if you are a day trader, as this will enable you to establish current support and resistance levels.
Trading with excessive amounts of leverage could accelerate your losses and place your entire forex trading account in jeopardy. In times of exceptional volatility it is advised to use lower leverage in order to reduce oversized losses and lessen the impact on your trading account.
Keep your Head above the Water
Volatile markets are rough seas that threaten to swap your trading account. As price volatility rises so too does the risk of a margin call on trades close to the edges of market rises and falls. As such, be sure that you have sufficient margin space to avoid having to close all open positions when market volatility increases.
Stay Afloat of Market Sentiment
Just as a lighthouse is your guide to the coastline, so too is an order book your guide to market sentiment. Illuminating trading patterns, price trends and the curve of support and resistance levels is vital to seeing the light at the end of a difficult trading tunnel.
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