We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bullish
Oil - US Crude
Bearish
Wall Street
Bearish
Gold
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bullish
USD/JPY
Bullish
More View more
Real Time News
  • LIVE NOW: Join @JStanleyFX as he runs through price action set-ups for the FX and CFDs market. https://www.dailyfx.com/webinars/1338844901231735299
  • it's time for the webinar, starting right now https://www.dailyfx.com/webinars/1338844901231735299 https://t.co/gLQFjotDmG
  • Senate Majority Leader McConnell says drop in revenue for States a concern, but national debt is also concerning- BBG
  • LIVE IN 5 MINUTES: Join @JStanleyFX as he runs through price action set-ups for the FX and CFDs market. https://www.dailyfx.com/webinars/1338844901231735299
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 96.52%, while traders in US 500 are at opposite extremes with 75.73%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/tkFbZhU9DE
  • Heads Up:🇺🇸 Fed Kashkari Speech due at 17:00 GMT (15min) https://www.dailyfx.com/economic-calendar#2020-05-26
  • LIVE IN 15 MINUTES: Join @JStanleyFX as he runs through price action set-ups for the FX and CFDs market. https://www.dailyfx.com/webinars/1338844901231735299
  • Heads Up:🇷🇺 Unemployment Rate due at 17:00 GMT (15min) Expected: 5.5% Previous: 4.7% https://www.dailyfx.com/economic-calendar#2020-05-26
  • Gold remains subdued in a tight short-term trading range as market sentiment continues to swing between risk-on and risk-off. Get your $XAUUSD technical analysis from @nickcawley1 here:https://t.co/wH5QSwGSft https://t.co/igwTLzrjp5
  • Commodities Update: As of 16:00, these are your best and worst performers based on the London trading schedule: Silver: 0.22% Oil - US Crude: -0.69% Gold: -0.86% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/cp4uj2e6Jf
Volatility Favors Japanese Yen, US Dollar Breakouts

Volatility Favors Japanese Yen, US Dollar Breakouts

2013-02-04 14:45:00
David Rodriguez, Head of Product
Share:

Article Summary: Elevated forex market volatility has coincided with outperformance in several of our sentiment-based trading strategies. Past performance is not indicative of future results, but our research shows that breakout-based strategies have historically done well in these market conditions, and we have adjusted our trading biases accordingly.

DailyFX PLUS System Trading Signals Forex traders continue to expect strong currency market volatility into February, and several of our sentiment-based trading strategies have seen noteworthy outperformance through recent market conditions.

Past performance is not indicative of future results, but we believe that similar forex volatility in the week and month ahead could produce similar trade opportunities in the near-future. More specifically, our Trend-following and Breakout-based systems have done well going long the Euro against the US Dollar (ticker: USDOLLAR) and Japanese Yen.

The EURUSD and EURJPY have fallen to start the new week, and early evidence suggests that a short-term EUR top could be in place. Yet elevated forex volatility expectations emphasize that traders should remain nimble amidst uncertainty.

DailyFX Forex Volatility Indices

forex_strategy_favors_breakout_trading_body_Picture_1.png, Volatility Favors Japanese Yen, US Dollar Breakouts

Our volatility percentiles (shown in the table below) are almost all near 100%; forex options traders predict that volatility will be the highest it has been in at least 90 days.

Such highs in these options implied volatility-based indicators often coincide with outperformance in volatility-friendly strategies. Our statistical studies show that breakout-based trading strategies have historically done well in these conditions.

Strong moves similarly warn against employing range trading-based strategies on the risk of significant breakouts in price.

View the table below to see our strategy preferences broken down by currency pair.

DailyFX Individual Currency Pair Conditions and Trading Strategy Bias

forex_strategy_favors_breakout_trading_body_Picture_2.png, Volatility Favors Japanese Yen, US Dollar Breakouts

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

To receive the Speculative Sentiment Index and other reports from this author via e-mail, sign up to David’s e-mail distribution list via this link.

Contact David via

Twitter at http://www.twitter.com/DRodriguezFX

Facebook at http://www.Facebook.com/DRodriguezFX

New to forex? Sign up for our DailyFX Forex Education Series

Definitions

Volatility Percentile – The higher the number, the more likely we are to see strong movements in price. This number tells us where current implied volatility levels stand in relation to the past 90 days of trading. We have found that implied volatilities tend to remain very high or very low for extended periods of time. As such, it is helpful to know where the current implied volatility level stands in relation to its medium-term range.

Trend – This indicator measures trend intensity by telling us where price stands in relation to its 90 trading-day range. A very low number tells us that price is currently at or near 90-day lows, while a higher number tells us that we are near the highs. A value at or near 50 percent tells us that we are at the middle of the currency pair’s 90-day range.

Range High – 90-day closing high.

Range Low – 90-day closing low.

Last – Current market price.

Bias – Based on the above criteria, we assign the more likely profitable strategy for any given currency pair. A highly volatile currency pair (Volatility Percentile very high) suggests that we should look to use Breakout strategies. More moderate volatility levels and strong Trend values make Momentum trades more attractive, while the lowest Vol Percentile and Trend indicator figures make Range Trading the more attractive strategy.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES IS MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION.

OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. Any opinions, news, research, analyses, prices, or other information contained on this website is provided as general market commentary, and does not constitute investment advice. The FXCM group will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance contained in the trading signals, or in any accompanying chart analyses.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.