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
Mixed
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
Oil - US Crude
Mixed
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
Wall Street
Bearish
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
Gold
Bullish
GBP/USD
Mixed
USD/JPY
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
More View more
Real Time News
  • Is there clarity on time of day? There is a material change in the risk around the event whether it is pre-NY open (gap and steady), during NY trade (volatility and steady) or after hours (let fear/greed build over the weekend for a Monday charge) https://t.co/wUSO6d44ns
  • Trump says press conference on China will be held Friday - BBG
  • There is a dramatic departure between yield curve pricing for a recession and other measures of near-term growth; the Q2’20 Atlanta Fed GDPNow is extremely alarming.Get your market update from @CVecchioFX here: https://t.co/eMd3T8EwDO https://t.co/joAVurkmJP
  • US Treasury Yields: 2-Year: 0.174% 3-Year: 0.220% 5-Year: 0.346% 7-Year: 0.537% 10-Year: 0.705% 30-Year: 1.474% $TNX
  • White House Economic Advisor Hassett says some workers going back to their jobs is building confidence $DXY $SPX
  • Gold Price Outlook: XAU Overbought as Cycles Drive the Bullish Trend https://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/daily_fundamentals/2020/05/28/Gold-Price-Outlook-XAU-Overbought-as-Cycles-Drive-the-Bullish-JS-Trend.html $Gold https://t.co/ntbvPQTHF9
  • Commodities Update: As of 18:00, these are your best and worst performers based on the London trading schedule: Silver: 0.34% Gold: 0.26% Oil - US Crude: -0.02% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/yvJX18QY14
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 96.91%, while traders in US 500 are at opposite extremes with 74.73%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/l7878VS4m7
  • As long as this moves forward, the verbal (Twitter) threats of action between the US and China will garner less and less actual market movement https://t.co/pvGOJuAG4N
  • Indices Update: As of 18:00, these are your best and worst performers based on the London trading schedule: US 500: 0.99% Wall Street: 0.76% FTSE 100: 0.08% France 40: -0.03% Germany 30: -0.11% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/f3oAYUPoEj
Strong Currency Volatility Favors Breakout Trading Strategies

Strong Currency Volatility Favors Breakout Trading Strategies

2013-02-13 16:00:00
David Rodriguez, Head of Product
Share:

Article Summary: Forex market volatility expectations remain high, and we continue to favor volatility-friendly breakout trading systems. Past performance is not indicative of future results, but these conditions have often coincided with outperformance in several of our sentiment-based trading strategies.

DailyFX PLUS System Trading Signals A continued surge in forex market volatility leads us to believe that volatility-friendly trading strategies may continue to outperform through the coming week of trading. Past performance is not indicative of future results, but it is worth noting that several of our sentiment-based trading strategies have historically done well in times of such strong market moves.

Volatility remains especially elevated in Japanese Yen currency pairs as recent controversy over Japanese monetary policy gives reason to believe that the currency will see noteworthy price swings. The US Dollar (ticker: USDOLLAR) likewise eyes big moves as the Dow Jones FXCM Dollar Index may have hit a short-term reversal point as it hit fresh multi-year highs.

DailyFX Forex Volatility Indices

forex_trading_volatility_elevated_breakout_systems_body_Picture_1.png, Strong Currency Volatility Favors Breakout Trading Strategies

Our DailyFX Volatility Indices continue to trade near year-to-date highs and suggest overall markets will remain volatile. Said indices measure volatility expectations seen through FX options prices and serve as traders’ best guess as to how much markets will move within a specific stretch of time.

We use those same market prices to derive our “Volatility Percentile” figures in the table below. These percentiles compare current volatility expectations with the past 90 calendar days, and our statistical studies show that breakout-based trading strategies have historically done well when these figures have been above 75%.

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_trading_volatility_elevated_breakout_systems_body_Picture_2.png, Strong Currency Volatility Favors Breakout Trading Strategies

--- 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/DRodriguezFXFacebook 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.