Problems with Volatility

Problems with Volatility

2018-11-24 0 By Caldero

One of the problems with trading is that, depending on whatever currency pair you decided to trade with it can take forever to get anywhere. Some markets have small payouts, some consolidate at many points more than the “standard” and of course there are some that seemingly absolutely go completely dead during certain times of the day.

The market is not already something that’s not easy to follow for a lot of beginners, so with all these problems in mind seemingly preventing “safe” trading, it could seem like a slog; but then the temptation sets in. You probably want to see your money grow big and go fast. I remember when I was originally learning to trade from my friend, he randomly entered the market just to show me how it was. He used a lot size that equated to the trade starting from a dollar and in barely any time at all, as he was giving me a brief explanation of how buying and selling differ in the market, he made $26. This is a type of money that people want to get…however, there is a second part to the story and something that is also very likely to happen to others. As soon as he saw the $26, he said “You see? I’m already doing well.” Then he explains something else to me when I ask him another question. Now that only took like, I don’t know, maybe a minute perhaps two, but by the time we looked back that’s $26 profit that he was making, it fell to a $13 profit; so he pulled out. Now, as I said before, that was just an example for me and a kind of dangerous example because again this is real money. I don’t know why he did it when he also has a demo account, but the point is that volatile markets are double-edged sword; you can win big but you can also lose big.

The GBP, for example, is one of the most volatile standard markets there is. It can get really crazy there; of course I’ve gone into the GBP before and experienced it myself. The volatility of the GBP just ruined me constantly and I made the mistake of not having enough money to justify the lot sizes that I was going in with because I really needed those big bucks but i kept losing the big bucks. It was terrible, but at the same time I’m sure that with enough research and enough funds I could have made out with a lot. The big issue in that case was that, the market goes up and down in each direction as things happen. However the ups and the downs in a volatile market are extreme. So more often than not, the market would majorly move to the point to my stop loss point and then move back majorly in the opposite direction. It didn’t matter if I predicted correctly as to where the movement was going to end up eventually, the bouncing of the market had a high chance of hitting the stop loss.

The point is that, if you go into a volatile market without a lot of research and a lot of backup, it’s basically making this more akin to actual gambling and that’s the opposite of what we want to do in trading. It’s not a gambling experience, it’s something with calculated attempts and an understanding of how the world works in terms of its active economics. I’m not telling you to completely avoid the volatile markets but it’s my advice that you should probably stay out of it if you’re just starting.