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Becoming a Better Trader: Adjusting for Changes in Volatility

Becoming a Better Trader: Adjusting for Changes in Volatility

Paul conducts webinars every Wednesday, Thursday, and Friday. For details and a full line-up of upcoming live events, please see the DailyFX Webinar Calendar.

In today’s webinar, we discussed volatility and adjusting expectations accordingly. Volatility is mean reverting and as such our trading should reflect this. If there is one certainty in markets is that volatility will rise and fall, over and over again.

With that said, when volatility spikes we need to understand it won’t last, and that if we have been benefiting from the expansion in volatility at some point it will end. How quickly a trader recognizes this will have a huge impact on trading results. After extended periods of low volatility we need to be on the watch-out for periods of increased volatility ahead. If you are a range/mean reversion trader this means you might be in for a surprise if you aren’t keeping an eye out for the inevitable expansion.

Today we discussed the dynamics of volatility and how to more quickly adapt to the changes in order to maximize those periods of trading which are most conducive to your methodology.

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---Written by Paul Robinson, Market Analyst

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