How to tackle Volatile Situation of the Forex Market?
Volatility in forex market is inevitable as the value of currencies keeps moving up and down. There are several factors that highly affect currencies’ values. Sometimes situations are unpredictable which may cause loss in forex trading or it is also possible that you may miss some good trading opportunities. When it comes to dealing with volatility in forex, you have to do certain things to survive in the forex exchange market.
Trading psychology: If you want to improve your profits in forex trading you need to keep control on your emotions. The mood of traders has a deep effect on how they look at the market. Sadness, negativity, arrogance, anxiety or overconfidence may lead them to make wrong trading decisions. According to the experts, many traders face psychological hurdles during volatile situation in the market which can be handled by the following ways.
Admit your mistakes: If you face loss in any trading, it is important to take responsibility of your action or wrong trading decision. Experts say that people who do not admit their mistakes, tend to hold on to a bad trade for few days. This may cost them plenty. So, accepting the responsibility of your own actions encourages you to find the right solution.
Set realistic expectations: Just because you get tremendous reward from a particular move, it doesn’t mean that the same trading strategy will help you to gain profit from every trade. It is impossible to gain profit from each move, so it is better to set realistic goals which should be based on your efficiency, performance, capital limitations and available time for trading.
Best practices of risk management: Experts say that it is a nature of the forex exchange market to move up and down quickly. You can deal with it by not paying attention to the short-term fluctuations. Apart from this, you need to do proper risk management for saving your trading account.
Keep Investment Costs Low: In situation of wild swings, trading in small amounts keeps your losses minimal as larger investments may make you worried when market moves to unfavorable conditions.
Correct use of stops: In volatile market, trader should cautiously place stops. Tight stops are not beneficial in a volatile market. If you want to take proper position size, you may use wide stop to allow your trade breathe.
Catch small gains: Once the market moves in favourable condition, adjust your stop and lock some gains. When the market condition is unpredictable or causing heavy ups-and down in currency rates, it is better to utilise every little edge available.