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Forex scalping volatility

Forex scalping volatilityForex Scalping – Criticism and Disadvantages. This article is part of our guide on how to use scalping techniques to trade forex. If you haven’t already we recommend you read the first part of the series on forex scalping. Scalping is popular, and profitable for some traders, but it is not without its risks. While trading, many scalpers are similar to marathon runners. They need to capitalize quickly on arising opportunities, and if those opportunities fade, a profitable trade must be a losing one, because a typical scalper will not wait long enough for another opportunity to arise for the same trade. The advantage of this approach lies in the many profit opportunities presented. For a long term trader, even a swing trader, one loss in a trade is by definition a big and important loss. Long term trades require considerable investment in time, and energy before they are profitable, and failure in one is an important setback. The scalper doesn’t suffer from this problem. He can fail in any single trade, regardless of its time or place, and still make a profit if the overall balance of his positions is profitable. This aspect can sometimes reduce stress, and create a more optimistic trading psychology as well. Yet, short-term trading does not, by any definition, offer the keys to a smooth and risk-free path to great profits. The scalper is playing a game of probability, while the long-term trader is playing the same game with the help of fundamental analysis and strategies. Although each trade is a lot less important for the scalper, in order to profit, he must still succeed in the overwhelming number of his decisions. A scalper will enter and exit his positions while trading a trend, but he still has to make choices about the direction of the main price action.

While trading a ranging market, the scalper may not need to make many decisions about directionality, but he has to have a good idea on how long the low volatility environment will last. In other words, discipline and planning are just as important for scalpers, but in a different way in comparison to what is usually experienced by other traders. In this section we’ll analyze the scalping strategy and discuss some of its disadvantages so that you can trade with calmer, more reasonable expectations while employing it. Our purpose is not contradicting the experiences of successful scalpers, or discouraging those who desire to adopt this method for future profits, but merely to help you recall that the strategy does not offer risk-free, easy trades for beginners or undisciplined individuals. The “Brokers Hate Scalpers” myth. First of all, let’s consider this venerable myth that has been publicized over the internet on both forums and blogs dedicated to forex trading. The argument of the propagators of this myth goes as follows: “Scalpers take little risk while trading, and are often successful. In order to hedge their positions, forex brokers counter-trade their clients, with the consequence that if a trader makes a profit, the broker, by counter-trading his position, suffers losses. Of course that makes brokers hate scalpers.” Let’s first state that no forex trader will do himself any good by making real, or imagined enemies of brokers. Regulated brokers are monitored by authorities, and most of the firms in the business are legitimate actors with decent practices.

There’s no way of trading the market without brokers (or ECN’s, but they are not used very often, and have their own disadvantages). And there’s no logic or merit in demonizing brokers as crooks or thieves. We, as traders, want to trade the markets, and to do that we need the services of firms which are monitored and regulated by the authorities. In previous sections we have already discussed how brokers hedge against client losses, and noted that a majority of client positions can be netted out against each other without the broker having to commit any funds. In fact, when such matches can be found, the broker does not even need to pass the buy or sell order client to the bank: all that it must do is matching the order with another customer’s opposing order while pocketing the commission, and assuming zero risk. The problem with scalpers arises because their rapid entryexit orders make the task of hedging hard for forex brokers with slow servers or outdated software. When they can’t do so, they get nervous, become worried that the scalper is trying to manipulate the system (exploiting latency issues, as they are called), and sooner or later terminate the forex account of the scalping trader. There are no statistics on the success ratio of scalpers, but there is no reason to assume to their success rate is any different from that of the overall market. Indeed, scalping is a demanding, and somewhat more sophisticated trading style in comparison to day-trading, or swing trading; there is no reason to expect that beginners will do better in scalping in comparison to their performance in these other trading styles.

Our analysis is confirmed by the public statements of many forex brokers present on websites and blogs throughout the web. The majority of established brokers actually have the stated policy of allowing scalpers to open or close positions in as short a time period as they desire. What is more, since scalpers trade much more frequently than regular traders, they are a good source of revenue for any kind of forex broker. No broker with an updated software and platform would be willing to deny scalpers the style which they like most unless he wants shrink his own business. Is it a good idea to scalp in strongly trending markets? Many traders favor scalping in strongly trending markets. This approach is defended on the basis of the notion that scalpers thrive in volatility, and that trends cause a great deal of volatility creating many trading opportunities. But is this idea justified on the basis of facts and analysis? Let’s first remember that while scalping, one misplaced, carelessly created trade can wipe out the gains of tens of successful trades in a short time. A scalper needs consistency above everything else. Discipline in trade sizes, take profit, and stop-loss orders, and a degree of skepticism towards arising opportunities are important components of a successful trading strategy. Let’s ask ourselves, then, which kind of markets offer the best conditions for the implementations of these principles? Would scalpers thrive in strongly trending and volatile markets, or quiet, calm markets where activity is subdued and volatility is low? Naturally, the best conditions will be found in the latter. Calmer markets allow us to exploit small fluctuations over a long time with little risk and good profits. Trending markets move rapidly, with widening and contracting spreads, where exiting a position before it reaches its full potential can be dangerous, and maintaining a calm and composed attitude is an additional problem.

We read online that scalping is best in strongly trending, liquid, volatile markets, and some of us wonder why so many people subscribe to these beliefs. This attitude is present either because the traders who write the articles don’t have that many experiences in scalping or because they use scalping strategies on a trend following scheme. The latter approach is not very useful to beginners, however, because they mostly choose the scalping style to make quick profits without worrying much about analysis or strategy. Picking up coins from a railroad. Indeed, scalping after news releases, or during very strong, volatile micro-trends can be similar to picking up coins from a railroad for a living. A determined practitioner can create a sizable income from this practice if he is persistent and patient enough, but also takes a small risk that can be extremely costly if it is not properly protected against. What is the risk? Of course, it is that he will be run over by the approaching train of a market shock, and will lose all his profits, and his ability to make any profit in the future as well. Is this a valid negotiation, a compromise? The answer to the question depends on your personality and approach to life in general. During a trend, the scalper cannot exploit “idle volatility”, or the directionless fluctuations that are often found in ranging markets. Since the market is strongly directional, he has to find a way of identifying the trend and exploiting it with small sized, and numerous orders. Scalping is probably not the best choice for a beginning trader.

The style demands constant attention, concentration, and diligent adherence to principles. The fact that trades are small-sized and quick means that there is a need to be very methodical about trade sizes especially, because irregular sizes will make us blind while trying to determine the performance of our account, and prevent the achievement of a smooth, regularly rising trading account. For a real scalper, fear is not the main emotional issue, unlike the case with many other types of traders. Since risk in each trade is usually very small, and it is possible to stop and exit any position without much trouble, there is little danger of the account being wiped-out or greatly reduced as a result of any single trade. Yet, the major emotional issue faced by scalpers is overtrading and agitation. Scalping requires patience. The trader must open many positions in the course of a single hour on an ordinary day, and at times, the slow accumulation of profits can be very frustrating. The trader may regret that he’s spending so much time trying to profit from minute price fluctuations. He may feel dismayed that so much effort bears so little fruit. Many other factors can lead to dissatisfaction and unhappiness which can cause the trader to enter an agitated state of mind. And yet, agitation is the worst enemy of a scalper. His finger must press the right buttons on the screen, must enter the correct prices, and place the proper decisions many times during the trading hours, and an uneasy, nervous mind will be prone to making many errors. A nervous mind will make the scalper feel like he’s fighting the markets, and lead to many unjustified and deleterious trading decisions. The scalper must know where to stop, and yet if he’s nervous, he’ll be unable to stop. Overtrading, based on the belief that the next trade will be the successful one “since one’s luck can’t go wrong so often” may quickly erode the account balance of any trader, and it’s especially dangerous for the scalping strategy.

It is on the whole a good idea to suspend scalping activity if you’re feeling that the emotional burden of scalping is too much for you at any time. Do not fight yourself, or the market, but stop trading for a while. It is certainly better than losing your wits trying to profit by battling the market, in other words, trying to improve by worsening your condition. Getting rich, or enriching the broker? The scalper is running against time in his dealings with the broker. He will make profits, suffer losses, open and close positions with different scenarios in mind, but in all that while he will still be paying the broker his due in the spread. Regardless of the size of profits or losses, the broker’s share must be paid, and the trader has to earn at least that much to make sure that his account is not bleeding money. The broker’s fee in the spreads is almost negligible when trading on a long term basis. A 3-pip spread cost is insignificant for a trader who makes 50-60 pip profit in trading, or even more in positions held over even a longer time. But the scalper’s profits are usually much smaller, in many cases closer to 5-10 pips for a competent person, and the spread is anywhere between 30 to 50 percent of the gains. Any scalper should keep a list of his trades which shows his actual gains, losses, and the amount that is paid to the broker. If the cost of the spread is about twice as big as the profits of trading, it is a good idea to change the trading strategy used, or to change the broker and open an account with another one which requires lower spreads. If average profit in pips is equal to the spread, our trade record can be improved, and better profits are possible. In the unusual case that the scalper’s profits are a lot larger than the spread it is time to add funds to the account, or perhaps increase leverage gradually. Traders need not be worried when the broker is making good profits.

As long as the relationship is reciprocal, there is no harm in seeing the broker making gains which are even more sizable than what is achieved by the trader. The threshold is profitability. As long as we are gaining from activity, there’s no reason to be worried about the fact that the broker is also benefiting from the relationship. Let’s conclude this part by briefly discussing the dangers posed by faulty interpretation of data. Sadly, many beginning scalpers still evaluate their results on the basis of some ethereal concept termed luck. In a string of wins, good luck is thought to be the causal agent, while a strong of losses makes us think that we have no luck on that day. Since many believe that one cannot have bad luck continuously, there’s a tendency to expect profits soon after a string of losses, and vice versa. Since individual results in short term trading are random, there is no justification for this reasoning, and at least as far as mathematics is concerned, a gain or a loss are equally likely even after a string of ten or twenty gains or profits in a raw. The other issue which traders must grapple with while evaluating their results is the clustering illusion. In this case, traders will see “order” in a string of random data (such as a list of scalping trade results). After seeing a string of, let’s say, five wins, they will begin to assume that this time their strategy makes wins more likely, and in response they will increase trade sizes, with often disastrous results. In order to achieve profitability and a degree of safety in scalping it is extremely important that consistency in trade sizes be maintained. If you make small profits with ten 1 lot scalps, and occasionally decide to throw in 3, 2 lot trades where you feel you’re doing well, you’re taking the risk of never going beyond breakeven, in the best case scenario. Make sure that you don’t get deluded by luck, or the clustering illusion to randomize your trade sizes.

You can instead use methods like the z-score to see if the win-loss streaks of your scalping strategies are any different from random results. Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you. Forex Pro Volatility Scalping Strategy. Forex Pro Volatility Scalping Strategy. Table of Contents. Forex Pro Volatility Scalping Strategy; Time Frame: 15 min, 30min. Market Hours:00:06-22:00 GMT. Volatility indicator (with moving average 5 period); Exponential Moving Average (EMA 11); Exponential Moving Average (EMA 30); Pivot Points Levels. Filter 11 EMA>30EMA only buy. Buy when 5 EMA> Volatility indicator above the withe level. Forex . , , . . 15- GBPUSD . 15 . Metatrader: Ultima ( 35); SD Auto Pivot ; ( ). : : 20 , 50, 200. . 20 > 50 > 200 . . , ECN . EURUSD 1 mintue .

, . , : Damiani ADX (DMI) Momentum 14 T ; : : ADX 14 28. 14 . Damiani . : ADX 14 , 28. 14 Damiani . 5 . . Forex Metatrader 4 (MT4) (s) . . Forex , . , . Forex Scalping – Extensive Guide on How to Scalp Forex. Forex scalping is a popular method involving the quick opening and liquidation of positions. The term “quick” is imprecise, but it is generally meant to define a timeframe of about 3-5 minutes at most, while most scalpers will maintain their positions for as little as one minute. The popularity of scalping is born of its perceived safety as a trading strategy. Many traders argue that since scalpers maintain their positions for a brief time period in comparison to regular traders, market exposure of a scalper is much shorter than that of a trend follower, or even a day trader, and consequently, the risk of large losses resulting from strong market moves is smaller. Indeed, it is possible to claim that the typical scalper cares only about the bid-ask spread, while concepts like trend, or range are not very significant to him. Although scalpers need ignore these market phenomena, they are under no obligation to trade them, because they concern themselves only with the brief periods of volatility created by them. Is Forex Scalping for you? Forex scalping is not a suitable strategy for every type of trader . The returns generated in each position opened by the scalper is usually small; but great profits are made as gains from each closed small position are combined.

Scalpers do not like to take large risks, which means that they are willing to forgo great profit opportunities in return for the safety of small, but frequent gains. Consequently, the scalper needs to be a patient, diligent individual who is willing to wait as the fruits of his labors translate to great profits over time. An impulsive, excited character who seeks instant gratification and aims to “make it big” with each consecutive trade is unlikely to achieve anything but frustration while using this strategy. Attention is essential for the forex scalper. Scalping also demands a lot more attention from the trader in comparison to other styles such as swing-trading, or trend following. A typical scalper will open and close tens, and in some cases, more than a hundred positions in an ordinary trading day, and since none of the positions can be allowed to suffer great losses (so that we can protect the bottom line), the scalper cannot afford to be careful about some, and negligent about some of his positions. It may appear to be a formidable task at first sight, but scalping can be an involving, even fun trading style once the trader is comfortable with his practices and habits. Still, it is clear that attentiveness and strong concentration skills are necessary for the successful forex scalper. One does not need to be born equipped with such talents, but practice and commitment to achieve them are indispensable if a trader has any serious intention of becoming a real scalper. Automated trading systems. Scalping can be demanding, and time-consuming for those who are not full-time traders. Many of us pursue trading merely as an additional income source, and would not like to dedicate five six hours every day to the practice. In order to deal with this problem, automated trading systems have been developed, and they are being sold with rather incredible claims all over the web. We do not advise our readers to waste their time trying to make such strategies work for them; at best you will lose some money while having some lessons about not trusting anyone’s word so easily.

However, if you design your own automated systems for trading (with some guidance from seasoned experts and self-education through practice) it may be that you shorten the time which must be dedicated to trading while still being able to use scalping techniques. And an automated forex scalping technique does not need to be fully automatic; you may hand over the routine and systematic tasks such as stop-loss and take-profit orders to the automated system, while assuming the analytical side of the task yourself. This approach, to be sure, is not for everyone, but it is certainly a worthy option. Some words on trade sizes and forex scalping. Finally, scalpers should always keep the importance of consistency in trade sizes while using their favored method. Using erratic trade sizes while scalping is the safest way to ensure that you will have a wiped-out forex account in no time, unless you stop practicing scalping before the inevitable end. Scalping is based on the principle that profitable trades will cover the losses of failing ones in due time, but if you pick position sizes randomly, the rules of probability dictate that sooner or later an oversized, leveraged loss will crash all the hard work of a whole day, if not longer. Thus, the scalper must make sure that he pursues a predefined strategy with attention, patience and consistent trade sizes. This is just the beginning, of course, but without a good beginning we would diminish our odds of success, or at least reduce our profit potential. Now let’s take a look at the contents of this article where forex scalping is discussed with all its details, advantages and disadvantages. Our suggestion is that you peruse all of this article and absorb all the information that can benefit you. But if you think that you’re already familiar with some of the material, to shorten your route, we present the table of contents of this article.

1. How scalpers make money: Here we will take a look at the logic behind scalping, and we’ll discuss the best conditions and necessary adjustments which must be made by a scalper for profitable trading. 2. Choosing the right broker for scalping: Not every broker is accommodative to scalping. Sometimes this is the stated policy of the firm, at other times the broker creates the conditions which make successful scalping impossible. It is important that the novice scalper know what to look for in the broker before opening his account, and here we’ll try to enlighten you on these important points. 3. Best currencies for Scalping: There are currency pairs where scalping is easy and lucrative, and there are others where we advise strongly against the use of this strategy. In this part we’ll discuss this important subject in detail and give you usable hints for your trades. 4. Best times for Scalping: There is an ongoing debate about the best times for successful scalping in the forex market. We’ll present the various opinions, and then offer our own conclusion. 5. Strategies in Scalping: Strategies in scalping need not differ substantially from other short-term methods. On the other hand, there are particular price patterns and configurations where scalping is more profitable. We’ll examine and study them in depth in this section. a. Range Scalping: Some traders consider ranging markets better suited for scalping strategies. Here we’ll examine why, and how to scalp under such conditions. b. Breakout Scalping: We’ll examine news breakouts, and technical breakouts separately and discuss suitable scalping strategies for both. c. Trend Scalping: Here we’ll take a general look at forex scalping in trending markets.

6. Trend Following while Scalping: Trends are volatile, and many scalpers choose to trade them like a trend follower, while minimizing the trade lifetime in order to control market risk. In this part we’ll examine the usage of Fibonacci extension levels for scalping trends. 7. Disadvantages and Criticism of Scalping: Scalping is not for everyone, and even seasoned scalpers and those committed to the style would do well to keep in mind some of the dangers and disadvantages involved in using the style blindly. 8. Conclusions on Scalping: In this final section we’ll combine the lessons and discussions of the previous chapters, and reach at conclusions about who should use the forex scalping trading style, and the best conditions under which it can be utilized. How Forex News Affects Forex Volatility. With its almost six trillion dollars daily turnover, the Forex market depends on Forex news to move. For this reason, Forex volatility and Forex news enjoy a direct relationship. Most of Forex news comes from the economic sphere. Job-related data, changes in the size of an economy, inflation, etc., offer traders clues about the economic performance of a region or country. Traders put the economic news together to find out the shape of an economy. Thus, the shape of a currency.

But, Forex trading means buying and selling currency pairs. Hence, traders compare to economies for every currency pair. It doesn’t mean Forex traders need an economic background. Merely, it means looking at the major economies around the world, like: United States of America Eurozone Japan Australia Canada United Kingdom Switzerland, etc. Now imagine that each economy has a currency: S. Dollar (USD) Euro (EUR) Yen (JPY) Australian Dollar (AUD) Canadian Dollar (CAD) British Pound (GBP) Swiss Franc (CHF) If you combine the currencies two by two, you have the main currency pairs to trade. Hence, Forex news from those economies will increase Forex volatility. In this article, we’ll cover various aspects related to Forex market news, such as: Forex news that moves the USD What Forex news matter for the EUR and other currencies Forex volatility in different trading sessions Daily Forex news to watch How to interpret the Forex news calendar. Forex News that Moves the USD. Any discussion about Forex volatility and what causes it starts with the USD. As the world’s reserve currency, it influences the entire Forex dashboard like no other currency. Because of the dollar, the currency pairs form two categories: majors and crosses. Any major pair has the USD in its componence. Hence, a major don’t. Only by splitting the pairs in such a simple manner, traders can avoid Forex volatility surrounding critical economic events. For example, one way to prevent wild swings in the trading account is to trade cross pairs during American Forex news. After the Bretton Woods conference, the USD became the pillar of the world’s financial system.

Moreover, the Nixon shock in 1970’s decoupled it from the gold standard. From that moment, it was only a matter of trust in the USD that kept foreign investors buying it. Nowadays, the USD is still the preferred choice when nations build foreign exchange reserves. This is an enormous privilege the USD enjoys, and other countries envy the USD status. Most Relevant US Forex Trading News. The Forex calendar news out of the United States is one of the busiest of them all. Because of the dollar’s role, every market depends on the shape of the US economy. Moreover, the Intermarket correlation means the dollar will move not only the Forex market but also other markets like bonds, stocks, options, and so on. Hence, it is all about interpreting the economic news. For a currency, it is all about the interest rate level. Hence, the Federal Reserve interest rate announcement and press conferences move the dollar. And, the Forex market.

The Fed meets every six weeks. On a Wednesday, right after the London’s close, the Fed releases the FOMC (Federal Open Market Committee) Statement. This is a text describing the monetary policy. Trading algorithms or robots scan the document with lightspeed and react. Quant firms and HFT (High-Frequency Trading) algorithms buy and sell based on differences between the previous FOMC text. Sometimes, even no change, is a signal for buying or selling. Once a quarter, or every two sessions, a press conference follows the FOMC statement. Never has the Fed hiked or cut the federal funds rate without a press conference to follow. Therefore, the federal funds interest rate level is THE Forex news to watch. As a rule of thumb, the higher the interest rate goes, the stronger the dollar becomes. The Forex market volatility increases tremendously during the Fed presser. Press representatives from around the world ask questions. And, the ChairmanChairwoman answers.

No one knows the questions. And, no one knows what the answer will be too. As such, the USD makes large swings all over the charts. Effectively, it trips stops both for longs and for shorts. CPI or Inflation to Mark in the Forex Calendar News. Inflation shows the change in the price of goods and services over a period of time. Typically, the inflation or Consumer Price Index (CPI) comes out monthly. It is one of the closely watched Forex news. The market reaches extreme Forex volatility levels if the CPI deviates from the target. Traders know the Fed closely watches inflation. Part of its mandate, the Fed targets a two percent level for the CPI. However, it doesn’t look at the regular CPI. Instead, it considers the Core CPI. Or, inflation without transportation, energy and food costs. The standard interpretation is that when inflation falls, the currency depreciates. How come? When inflation is in the fall, expectations grow that the Fed will ease the monetary policy. Or, it’ll cut rates. Because there’s a lag between the two Forex news, traders react on the spot.

After all, trading is a game of expectations. Right? As a Forex volatility indicator, inflation doesn’t “damage” the charts as when the Fed changes the rates. However, if deviates strongly, the Forex volatility spikes as traders bet the Fed will react. Forex News Trading – Jobs Data. The other side of the Fed’s mandate refers to jobs. Fed vows to create jobs. Thus, it’ll change the federal funds rate level accordingly. As such, jobs-related data like: NFP – Non-Farm Payrolls ADP – private payrolls Jobless claims The unemployment rate, etc. are Forex volatility news to mark in the economic calendar. There is a direct relationship between job creation and the USD reaction. Hence, when the U. S. economy creates more jobs than expected, the USD rises.

And, the opposite happens when it doesn’t. Out of all jobs data, the NFP is a great Forex volatility indicator. Released every first Friday of any month, the market keeps a tight range. Moreover, the Forex market prepares in advance for the NFP reading. Sometimes, for more than a week. But the Forex volatility surrounding the release doesn’t depend only on the actual NFP number. Instead, most of the times the labor department releases revisions for previous data. Sometimes, those revisions dwarf the current NFP Forex news. As such, the initial market reaction may dissipate quickly when revisions exist. Another Forex News that Matters for the USD. Throughout the six weeks between two Fed meetings, the Forex news feed is full of economic releases. They come from all areas: The three sectors make the GDP (Gross Domestic Product) and help estimate the size of it. Or, the size of economic expansion or contraction. Based on the data in each sector, traders estimate the economic evolution. And, its impact on the Fed’s interest rate decision. Again, because there’s plenty of time between the economic releases, traders will respond on the spot.

They’ll prepare for the Fed statement and decision by selling or buying the USD in advance. Out of the three sectors, the services data creates the most Forex volatility. Obviously, the reason is the U. S. economy is a service-based one. Or, the services sector sits at the core of the U. S. economy. When the pillar suffers, the contagion spreads rapidly. Forex news to watch from the three sectors: ISM Manufacturing and Non-Manufacturing a survey showing the state of the manufacturing and services sector Retail Sales shows the consumer’s health Average Hourly Earnings an early indication for inflation’s evolution Personal Spending and Personal Income shows the disposable income’s evolution Existing Homes Sales shows the health of the housing sector Building Permits helps to estimate the future projects in the housing sector. These are only some of the Forex news to consider. While second-tier data, the market reacts sending the Forex volatility to extreme levels if the actual differs from the forecast. Forex Volatility Created by another Forex News in the World. While everything in Forex trading depends on the USD, some other news around the world makes the currency market moving. Keep in mind that a currency’s value depends on the counterpart currency. For example, if you say that the USD is 1.27, that’s irrelevant. A correct statement says the USD is worth 1.27 CAD. As such, there’s another currency to judge.

Hence, another economy to interpret. When Forex news out of Canada comes out, the CAD may strengthen. As a reaction, the USDCAD tumbles, without the USD having anything to do with it. Just that the valuation changed. European Forex News to Consider. The Eurozone economies form the second largest economic block in the world. Thus, the Euro’s role in creating Forex volatility shouldn’t be ignored. Despite the general belief, in Europe only a few events matter: European Central Bank (ECB) interest rate decision and press conference every six weeks the ECB announces the interest rate level and holds a press conference after each meeting inflation released monthly, it holds the key for the future ECB moves PMI’s (Purchasing Managers Index) a survey, the equivalent of the ISM in the United States. The Forex volatility surrounding the ECB reaches extreme levels. Sometimes, without the ECB President saying nothing new, the market shoots higher or lower, breaking essential levels.

The United Kingdom and Australian Economic Data. Even though the two economies are far away from one another, there are many similarities between the two. One, for example, is the fact that back in time the Australian Dollar was, in fact, the Australian Pound. Besides the two central banks’ meetings (Bank of England and Reserve Bank of Australia), the two currencies react to: Both Australia and the U. K. release the PMI Construction, analyzing the construction sector carefully. The Pound and the Aussie Dollar are popular currencies. Regarding Forex volatility, the GBP pairs reach extreme levels easier than Aussie pairs. As a particularity, the AUD is a commodity currency. Hence, anything from the gold and other precious metals news makes the AUD moving. Different Economies to Watch Too. Japan faces a terrible crisis. For decades, there’s no inflation.

Because of the aging population and cultural problems (e. g., difficult to immigrate to Japan), Japan is a closed society. It makes it difficult to rely on external sources. All progress must come from within. Bank of Japan was the first central bank to tap uncharted territory in monetary policy. It bought Japanese government bonds of unprecedented size, and in vain. Two events from Japan create Forex volatility: Bank of Japan (BOJ) monetary policy shifts Tankan report. The later is a comprehensive report about the entire Japanese economy. When gloomy, the JPY tanks. SNB and Forex Volatility. The Swiss National Bank (SNB) made Forex volatility charts experience new levels. In 2015, the SNB dropped the EURCHF peg. For years, the bank held the cross at an artificial rate. It promised to buy and maintain the level, no matter what. However, 2015 proved too tricky. The ECB prepared to launch its quantitative easing, making it impossible for the SNB to hold the peg. Faced with massive losses, the SNB gave up and lost tens of billions on the move. As history tells us now, it recovered all the losses and some more.

But, in those days, the SNB action created mayhem on the currency market. This is just another proof that Forex news doesn’t have to come from the Forex news calendar. Instead, a groundbreaking decision changes everything. Forex Volatility in Different Trading Sessions. Forex trading goes around the sun. It starts with Asia, Europe, and ends in America. Rinse and repeat. The biggest financial center in the world, London, takes the central stage. Now that Brexit became a reality, things may change. However, the London sessions stand out as the one where Forex volatility is on the rise. Next, the United States session follows. Because there are some hours where trading goes on both sessions, Forex volatility is at its peak. That’s especially true at the so-called fixing times when the clearing houses buy and sell and most of the options expire.

After the fixing and London close, the North American session loses steam. That is, if no Forex news comes later, like the Fed interest rate decision or the FOMC Minutes. Daily Forex News to Watch. The term Forex news doesn’t refer only to economic news. Instead, it consists of all news with the potential to influence the currency market. Therefore, the Forex calendar news contains other events like: Central bankers’ speeches Fed Chair semi-annual testimony in front of the U. S Senate ECB President’s testimony in front of the European Parliament Presidential elections, referendums, etc. Political summits. They all move markets, together with the news that come from unexpected places like: Natural catastrophes Wars Economic wars (g., imposing tariffs) Geopolitical events G7, G20 meetings, etc. As probably is obvious, Forex volatility depends on more than the classic economic events. You’ll never know what happens next, and how the markets will react to it. Perhaps this is one of the reasons why so many retail traders find this market so attractive. The Forex market is like an entity that changes continuously. In a way, it is only reasonable.

Almost a decade ago, the execution of a trading order took longer than today. Even the trading accounts for the retail trader were different. To have an idea, the spread for the most popular pair, the EURUSD, had three pips. Three full pips! Nowadays, event 0.2 or 0.3 exists. Thus, it means the market changed together with new technologies. Forex volatility changed too. It is hard to tell if for the worse or for, the better. When Forex volatility is on the rise, retail traders blame the High-Frequency Trading (HFT) industry. The robots are responsible! What can we do? When volatility misses, whose to blame? You guessed: still, the HFT industry, as the super-computers buy and sell so fast as levels barely move. There’s always supply and demand of almost equal sizes. Forex news is a big driver for volatility too. As explained here, only the prospect of a bit economic decision is enough to make markets still.

Forex traders should be prepared for anything. Despite having a stop loss in place, there’s no total protection for a trading account. Macroeconomic trends became so crucial that currencies react the first to changes. News from parts of the world far away (e. g., North Korea launching missiles) make markets tremble. First, the stock market reacts. If the news is negative, it’ll tumble. Second, when the stock market closes, the futures market takes it from there. And so on. Like a snowball, it’ll roll over, and the effect appears on the Forex market too. First, the JPY, and then the other risk onrisk off pairs. To sum up, every piece of economic, political, etc. data, is Forex news. Because high-impact Forex news leads to higher Forex volatility levels, it is part of a trader’s job to trade the news too. GET STARTED WITH THE FOREX TRADING ACADEMY.

Damyan is a fresh MSc International Management from the International University of Monaco. During his bachelor and master programs, Damyan has been working in the area of financial markets as a Market Analyst and Forex Writer. He is the author of thousands of educational and analytical articles for traders. When being in bachelor school, he represented his university in the National Forex Trading Competition for students in Bulgaria and got the first place among 500 other traders. He was awarded a cup and a certificate at an official ceremony in his university. How to Use Forex Volatility Statistics. It’s possible to track how much a currency pair moves on average each day, how much it moves each day of the week, and even how much it moves each hour. This information, which is readily accessible, aids traders in making better trading decisions, such as when to enter and exit trades, and where to set profit targets. Wouldn’t it be nice to know if the EURUSD is likely to move 60 pips today, or 90, or 120? While we can’t know for sure what a currency pair will do on a given day, we can use averages to give ourselves a good idea.

Forex volatility statistics provide this for us. We can see how much a currency moves on average each day, how much it tends to move each day of the week, and how much a currency pair tends to move each hour. For reasons we will discuss below, there are significant benefits to having and tracking this information on a regular basis. Mataf provides easy to understand volatility charts. Oanda provides a Value At Risk calculator, which can also be used to estimate volatility over different time frames. The figure below shows multiple currency pairs. The columns along the left show various currency pairs along with a small graph with the recent price trend. The column we care about the most is the one called “pips”. This is how many pips the currency moves, on average, in a 24-hour period. By default the average is calculated based on the last 10 weeks of price data. This can be altered by putting in a different amount of time, such as 5 weeks, or 20 weeks in the Formula box and then clicking the refresh button next to it. Source: mataf. net Nov. 1, 2017 – Click to enlarge. Click on a currency pair to bring more detailed data.

In the figure above the EURCAD pair has been selected, which brings up additional charts on hourly volatility and day of the week volatility. While the “pips” column gives the average of how much a pair moves each day, certain weekdays tend to be more volatile than others. In the example above, the EURCAD has average daily movement of 114.84 pips, but Monday (1) and especially Tuesday (2) tend to have volatility lower than the average. Wednesday (3) and Friday (5) tend to have volatility above average. Thursday (4) is close to average. Within each day, certain hours are more volatile than others. The hourly chart is set to the GMT time zone. The current hour and day when you view these charts, on Mataf, are always marked in yellow. In this way, you can make a quick time conversion if needed. For day trading, consider trading during the times of day where there is increased volatility, and avoid day trading during the hours when volatility is really low. Please note that this is a snapshot in time, and these statistics will constantly change. The hours that are most volatile tend to stay the same, but how much the price moves during these hours will change. Which weekdays are most volatile also tend to stay the same, but could change over time as well. When you click on a currency pair on the Mataf volatility statistics you will also see a third chart. This chart shows volatility over the last several years.

This is useful for assessing overall market conditions. For example, you may have had a phenomenal year day trading or swing trading last year, but then over time you start struggling. It could be a change in volatility. The chart below shows the long-term daily volatility in the EURUSD. Back in 2010, 2011 and 2015, the EURUSD was moving more than 140 pips. That makes it a little easier to jump into strong trends. In 2014, 2016 and 2017, volatility was largely below 100 pips per day on average. Do you think a 40% or more change in volatility could affect your trading? It will, meaning we need to adjust for such changes. Source: mataf. net Nov. 1, 2017. Ways to use Forex Volatility Stats. There are multiple ways to use forex volatility statistics. Some of those ways are discussed below.

–Changes in volatility can be used to confirm changes in direction, or point to an acceleration of the trend. Sharp moves to me are more important than a meandering price which has little force behind it. For more on this topic, see Velocity and Magnitude. –Volatility is often associated with a change in the direction. Trends are often complacent, reversals are not. Therefore, heightened volatility is usually seen during corrections within trends and in trend reversals. –While a pair moves a certain number of pips in 24 hours, it will move less during the specific hours we are trading (since we can’t trade all day). For instance, the EURUSD may move 120 pips per day, but only move 85 pips during the US session, or 75 pips during the European session. If the daily figure is used, but we are only day trading for a few hours each day, the statistic could be very misleading. If day trading, be aware of the specific stats for the time of day you are trading. See Best Time of Day to Day Trade Forex for more details. –During a trend volatility is often steady or will decline. If the trend accelerates we will see a rise in volatility.

This can be a confirmation or a signal the market is nearing a turning point (a very powerful volatility thrust after a long-term trend is called a “blow off”), but it depends of the maturity of trend. An example of a trend accelerating in a “blow off” fashion, which led to a big trend reversal, is the USDCHF in August of 2011. –Changing the number of weeks that are averaged on the volatility study may greatly affect the data provided. If you are a short-term trader, track volatility statistics based on the last 3 weeks or less. Longer-term traders can benefit from looking at volatility averaged over the longer term (default is 10 weeks). All traders will want to monitor volatility over time, as this may provide insight into reasons for improved or lack-luster trading performance. –Intraday volatility, which is the number of pips a currency pair moves in day, provides a lot of information about where to place profit targets and when to enter trades. If you wish to exit a position today, the chances of an order filling well beyond the daily average range are slim, unless there is a significant news event occurring. Say the EURUSD already moved 100 pips today (distance between high and low), and average movement is only 80 pips for the weekday you are trading (subject to change). If you buy near the high, expecting the price to go even higher, you are going against the statistical odds. Buying near the high and placing a target 20 pips above means the price will have to move 120 pips that day…well beyond the average of 80. While it could happen, it’s not a high probability trade. Same with taking a trade near the low of day, in this case, and expecting the price to drop even more.

If the price has already moved beyond what it typically moves in a day (and there is no major news that is driving the increased volatility), it’s a low probability trade to expect the price to keep expanding its range a lot more. That said, an average is just an average. It is not a crystal ball. Any particular day may be more or less volatile than the average indicates. Intraday volatility should be on a day trader’s radar, but it is not the only factor to consider. –Volatility lets us know when to trade, and when not to. Day traders are especially susceptible to the cost of paying the spread, and when volatility drops so does profit potential. Less volatility, and reduced profit potential, makes the spread more expensive. Therefore, short-term traders usually benefit by NOT trading when volatility is very low. –Certain days of the week provide greater opportunity. Certain hours of the day are more volatile than others. Stick to the day and times that offer you the greatest opportunity.

This may vary depending on your strategy. –If your trades last more than a week, the daily data provided by Mataf may be overkill…you simply don’t need that much data. Apply an Average True Range (ATR) indicator to your charts, and this will likely provide you with all the volatility information you need. –If using an ATR, you can change the time frame of your chart from daily to weekly. On a weekly chart, the ATR will show how much that currency pair typically moves over a one-week period. –Volatility is always changing. Monitor changes in volatility, especially if your strategies are sensitive (most are) to these changes. Final Word on Forex Volatility Stats.

This is a brief introduction on how to use forex volatility statistics. Traders are encouraged to educate themselves further on volatility and statistics. Refer to the Daily Forex Stats page for forex volatility resources, as well as other trading statistics such as correlation. You may find that being aware of volatility helps you control risk, find alternative trading strategies and alert you to potential dangers or opportunities. By Cory Mitchell, CMT. Check out my Forex Trading Strategies Guide for Day and Swing Traders eBook. Over 300 pages including forex basics to get you started, 20+ forex trading strategies, and how to create your trading plan for success. Volatility scalper indicator. This indicator is sensing the high volatility of market price. It reflects when the market makes big moves on the same bar. I think it can be applied to any timeframe, but i have a better feeling on applying it on higher timeframe on forex pairs. Nevertheless, it would also make the job on any market, but the treshold parameter would be adapt to pointdecimal of the item you would trade.

No information on this site is investment advice or a solicitation to buy or sell any financial instrument. Past performance is not indicative of future results. Trading may expose you to risk of loss greater than your deposits and is only suitable for experienced investors who have sufficient financial means to bear such risk. ProRealTime ITF files and other attachments : New! PRC is also now on YouTube, subscribe to our channel for exclusive content and tutorials. Hey Nic, is there any issue with the indicator on your end with different pairs. I’m not sure what settings I should be using. Could you please provide your settings? Thanks mate! The “threshold” parameter should be adapted to the instrument, for Forex, use 0.01 as mentioned in the code. Thanks mate, how about 0.001? Or is that too sensitive? Depends of which pair you are trading and the actual volatility. Since it is not calculated dynamically, you have to set it with a value that suits to the market. Bonjour. J’aimerais savoir s’il est possible de “truquer” un peu l’indicateur pour qu’il donne le resultat sur timeframe plus important que celui affiche…

bref de contourner la limitation MTF de PRT pour cet indicateur. I actually like this very simple idea. It can also be useful for market micro-structure systems (seconds and milliseconds) when used in conjunction with other filters. I have introduced an automatic threshold parameter with smoothing and vertical shift controls. Volatility Scalper Version 1.2 -- Variables threshATRPeriod = 40 smoothing = 2 verticalShiftPercent = 0 -- threshATRPeriod = max(1, threshATRPeriod) smoothing = max(1, smoothing) diff = averagetruerange1 - averagetruerange2 if(close-close1)>0 THEN upsidevol = averagetruerange1 + diff * 0.5 upsideVol = max(upsideVol, 0) downsidevol = 0 ELSE upsidevol = 0 downsidevol = averagetruerange1 + diff * 0.5 downsideVol = max(downsideVol, 0) ENDIF. t = DEMAsmoothing(AverageTrueRangethreshATRPeriod) t = t + (t*(verticalShiftPercent100)) RETURN upsidevol coloured(150, 200, 100) style(histogram, 1) as "up" , downsidevol coloured(200, 150, 100) style(histogram, 1) as "down", t as "treshold"


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