The Forex market is a symmetrical one. What I mean is for every advantage Forex offers, the very same aspect can become a trader’s worst enemy. Take Forex volatility for example.
Due to Forex volatility, the opportunity for profits in the Forex market is unprecedented. On the flip side, that same volatility can lead to devastating losses almost instantaneously.
The big question is how does a trader capitalize on that Forex volatility to his or her benefit and not let it become the cause of his or her failure in the Forex market.
The answer, while it might include many different aspects, is actually one; trade responsibly. It all starts with discipline. If you trade Forex with discipline, act based on what your strategy tells you and not what your heart or pocket tells you, then nine out of ten times, the volatility will work in your favor.
So how do you trade responsibly? Well for starters, don’t be greedy. Set tight stop losses when there is high Forex volatility so that if and when the market goes on a nosedive, your position will trigger the stop loss and you will walk away with minimal damage.
On the other hand, use take profits religiously. Yes, everyone likes to make money and everyone therefore likes to see their position going their way, but here is a little secret for you, what goes up must come down. When your currency does end up going down (or up if you sold the currency) you want to be on sidelines smiling due to the fact that you got out on time.
All these basic concepts come down to trading based on a strategy and not based on your emotion. Forex volatility can be your best friend but if you make the mistake of treating the Forex market like Las Vegas, it will quickly become your arch enemy.