Talking Points:
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- This webinar is an archive of a previous session hosted on the topic of ‘How to Adapt Your Strategy to Rising Volatility.’ The basis for today’s webinar was based upon the findings from the DailyFX Traits of Successful Traders Research series. This is a free trading guide available to anyone that might want it; please click here to input a request to receive the free trading guide.
- With numerous peculiarities showing across global markets while volatility levels recede, traders should remain cautious as a litany of risk factors could flare-up at a moment’s notice. While many markets may be quiet and subdued at the moment, just a year ago we saw volatility spike very quickly as Chinese equity markets continued to collapse.
- The economic slump in China continues to present risks to global markets, a full year later.
- The mechanics of adjusting for an increase in volatility were dialed down to three primary mechanisms:
- Leverage (decrease leverage in low-volatility periods in which pickups in vol might be expected).
- Stop distance, i.e. Risk/Reward. Investigate tighter stops in potentially volatile markets as wider stop distances simply bring greater exposure to each individual trade setup.
- Exposure/Diversification: Because of the two-sided nature of FX-pairings, FX traders run the heavy risk of overexposing themselves to one individual market ‘theme,’ such as USD-strength/weakness. We discussed an exposure-based strategy as an idea for how traders can look to diversify across themes such as the US Dollar.
--- Written by James Stanley, Analyst for DailyFX.com
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