The forex marketplace supports a diverse community of successful independent traders who have developed winning strategies that work during changing market conditions. Trend-following strategies are popular among newbies, but veteran traders truly earn their keep during times of volatility. This article gathers forex trading volatility indicator summarizes some longtime traders’ forex volatility trading strategies that can win even when markets are volatile.
In fact, the strategies in the volatility trading playbook work best during times when the gains from trend-following systems lag far behind. Well-designed mechanical trading systems can anticipate and take advantage of changes in volatility, then exit the trades without giving back the open profits. First introduced by the legendary trader J. Parabolic indicators help determine the direction of a currency pair’s price movement as well as indicating when the trend is likely to change and a price reversal is imminent. These indicators work well for determining both entry and exit points in volatile currency markets, since prices tend to stay within parabolic curves during trends. When prices move wildly, parabolic indicators can help show the direction or change in trend.
Successful parabolic stop-and-reverse strategies are also time-focused: The mechanical trading system weighs the potential gains against the amount of time the position must be held in order to have the best chance of achieving those gains. For example, when the parabolic indicator generates a buy signal, the trade is entered. Still, order to reduce the number of quick shake-outs from volatility whipsaws, most parabolic traders filter their trading signals by using a trading volume screen as well as a variety of other indicators. For long signals, the mechanical trading system buys when the currency pair’s price reaches a parabolic point above the current market price, and the trading volume is higher than the five-bar simple moving average trading volume.