Like a rollercoaster ride, you can experience thrill and excitement while trading. The market can potentially surge up or plunge down in a blink of an eye. That’s Volatility.
WHAT IS FOREX TRADING?
“Forex” refers to foreign exchange where you trade one currency against another in pairs. A popular currency pair is USD/JPY (U.S Dollar / Japanese Yen). In trading, when you buy(long) a currency pair, you buy the base currency and at the same time sell the quote currency.
Your Buy trade(long) will profit when USD increases in value against JPY. These exchange rate fluctuations are what we refer to as price-interest-point movement or PIP.
“When you’re in a Buy trade(long), you want the market to go up,
and if you’re in a Sell Trade(short), you want it to go down.”
Volatility measures how much the market is moving. Bigger price fluctuations represents higher volatility. There are several factors and events that will contributing to market movement causing higher volatility.
These factors range from;
* Economic news; periodic data releases; non-farm payroll
* Interest Rate changes
* Political developments; change in political leaderships
* Herd mentality; following the hype; Gamestop
FRIEND OR FOE?
Higher volatility is usually associated with uncertainty and risk, but it can also represent opportunity to traders. Higher volatility simply means there are more movements in the market. This can result in more opportunities for traders.
There are periodic timings where the market tends to be more active, where two exchanges are open and operating at the same time. Read more about it here.
Volatility can be a double-edged sword. Higher volatility brings about more opportunities along with its relevant risk. While lower volatility provides security but may not be attractive for its short-term performance. A trader should understand the risks of trading and how volatility can affect your trading journey.
At JF Lennon, we focus on practicing a systematic approach comprising of; Strategy, Risk Management and most importantly Emotional Discipline to achieve consistent profits in Forex Trading while keeping it Fun, Easy, and Stress-Free.
Forex trading involves significant risk, and you should understand the ins and outs of any investment before making an informed decision. Join us for a session to find out more about the basics of Forex Trading, and more!