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Trading Strategies for Volatile Markets

As you probably already know, the forex market is the world’s largest financial market seeing trillions of dollars worth of daily trading volumes. The forex market is also incredibly volatile because of its high liquidity and also due to other political, economical and environmental factors. This causes price fluctuations that may either see a trader profit significantly, or alternatively lose all their capital. 

A robust, well-planned trading strategy is incredibly important to manage this volatility. The strategy must however align with your trading goals and cater to your level of expertise, tolerance for risk, available budget and the amount of time you have available to trade. In this article, we’ll discuss common trading strategies used by traders to handle volatile markets.

Trading Strategies for Volatile Markets

Trading the news

A news trading strategist will usually trade based on news, before and after the announcement or release is made. Assessing the news as soon as it’s been released is vital, as is the ability to make a fast decision on how to trade it. Somebody adopting a news trading strategy must understand how the financial markets work, how the news is factored into an assets price (fully or partially?), and whether the news matches market expectations.

Key tips for trading the news:

Becoming a day trader

Day traders look to execute frequent trades throughout a trading day. Positions are typically held for milliseconds up to several hours but not usually overnight. Like scalpers, day traders make use of technical analysis to assess the markets and make gains off short-term price fluctuations. Price volatility and average day range are also important for day traders. Other traits of day trading are as follows:

Someone looking to engage in day trading must ensure they have the time available to dedicate to this activity throughout the trading day.

Implementing a scalping strategy

A scalper is a type of trader who attempts to capture smaller price movements as a way of making a profit. They typically enter and exit the market several times during a trading day, holding onto positions for seconds to minutes at most. This short-term trading strategy is usually utilised by a trader with enough time on their hands to manage up to hundreds of trades a day. They usually close trades by the end of the trading day to avoid overnight risk. Other scalping stragey characteristics are as follows:

Traits of a scalper

A scalper is usually someone with extensive trading expertise, a high tolerance for risk and who can take decisions in an instant. Someone who doesn’t have the grit to monitor charts continuously, make snap judgement calls, or seeks a slower-paced, longer term investment strategy, is probably not going to adopt a scalping strategy.   

Types of analysis for scalping

A scalper will usually use technical analysis to make a decision regarding a trade. Some of the most popular include trading decisions. This includes indicators like Exponential Moving Averages (EMA), Relative Strength Index (RSI), MACD (Moving Average Convergence Divergence) Indicator, Parabolic SAR (Stop and Reverse), etc.

What is a swing trader?

Swing traders attempts to make short or medium-term gains in any financial instrument (e.g., forex, stocks, commodities, etc) over a period lasting from a few days to weeks. It usually entails holding a trading position either long or short for more than one trading session (but not longer than a couple of months at most). Implementing a swing trading strategy requires a good understanding of technical analysis, as well as fundamental analysis as an additional filter. This is because a multitude of factors can impact trading performance, from central bank announcements, to interest rate hikes, to industry or investor sentiment, to political instabilities and even natural disasters. Like day traders and scalpers, swing traders typically use risk management techniques to manage price movements. Because swing traders also consider longer term trends to make trading decisions, gaining expertise on and managing fundamental risks effectively is key.

Some of the indicators or tools used by swing traders include price range tools, momentum indicators, moving averages on candlestick charts, as well as assess other technical patters in order to make informed trading decisions.

Trading with T4Trade

T4Trade is a great broker that offers a variety of tools and resources to help you become a more trader, regardless of the strategy you intend using. T4Trade’s exclusive Academy is an incredible source of educational material that cover a range of topics relevant to trading different volatile markets and delivered by T4Trade experts. Irrespective of what type of learner you are, there is something for everyone, be this videos, podcasts, videos-on-demand, or even Live TV. The broker’s blog page is also packed full of trading insights and answer many of the questions traders tend to ask. T4Trade traders can also access over 300 financial instruments across 6 asset classes with some of the most competitive conditions. This includes flexible leverage, competitive spreads, quick withdrawals and deposits, fast executions, and 24/5 multilingual, top-tier customer support.

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 64% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer: This information is not considered as investment advice or an investment recommendation, but is instead a marketing communication.

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