Some say that volatility is a forex trader’s best friend, but how do you make profits on a low-volatility trading day or when there are not any major catalysts?
Listed below are just a few suggestions on the best way to gain profits even when markets look like in snooze mode:
1. Have a look at currency correlations for possible trade opportunities
A scarcity of central bank announcements or top-tier economic reports doesn’t necessarily mean a low-volatile trading week for the main currencies. One among some great benefits of currency trading is that it’s not only depending on central banks and economic data for some motion.
All transactions that involve money can affect the provision and demand of a currency. Movements of presidency bonds, equities, and even big mergers and acquisitions (M&A) flows also can influence the value of the main currencies.
After all, you possibly can’t just buy the dollar since the weather in your brother’s cousin’s neighborhood is remarkably bad. You furthermore mght should be sure that other traders are seeing the identical correlations you’re seeing!
2. Try making carry trades
As mentioned within the School of Pipsology, carry trades simply benefit from rate of interest differentials.
If prices generally stay the identical, you possibly can earn money by buying currencies with higher rates of interest against ones which have lower rates. Currency crosses and exotic pairs often present the most important carry trade opportunities.
Just be sure you concentrate to your broker’s spreads, as they may be punishing when there’s not enough volatility to go around.
3. Find strategies for a low volatility environment
Though trend-trading and similar volatility-based strategies are forex trader favorites, you could possibly also benefit from low-volatility approaches to take home some pips.
It is advisable to try strategies that give attention to ranges, larger position sizes, tighter stops, oscillators, and even trade lower time frames. Be at liberty to get creative along with your pip-making strategies!
4. Look out for brand new game changers
Simply because there’s no catalyst today doesn’t mean there won’t be any market-moving report tomorrow. Have a look at economic reports collectively and see if there are any changes that may alter a central bank’s policy bias. Take heed to central banker speeches for any hints of policy changes within the near future.
Scan your news feeds and sustain with the forex grapevine for any issues or tidbits that may appear like the subsequent market-mover for the main currencies.
Last but definitely not the least, you can too concentrate to overall risk sentiment for possible trade opportunities. Just be sure you stay flexible enough to weather any extra volatility!
Consistently profitable traders will not be one-trick ponies. They learn to adapt to different trading environments and by some means make pips even when there’s limited trading volatility.
This doesn’t mean that you need to force trades even when there are not any big moves to benefit from. This just signifies that, if you need to be consistently profitable, then you’ve got to begin developing and practicing strategies that may keep you in the sport on low-volatility trading days.