Is volatility a good thing?

People are always asking me, "the crisis that is happening around the world, does it impact forex trading?” The answer in short is yes.

As an example, let’s look at what is happening in the Euro Zone and particularly Greece. The market opened up on Monday with Greece stocks opening higher, however banks still losing. The ECB (European Central Bank) assisted the banks through the emergency liquidity fund. This amount was unchanged by the ECB on Wednesday at around $98.5 billion (R1.23 trillion).

This sort of news gets many individuals concerned about the impact that it might have on their funds in the forex market. The fact of the matter is, that the news coming out of Europe creates volatility on the markets which has provided further assistance to the bullish gains the Dollar is experiencing. Further volatility emerges with the realization that the Greek banking sector is well on track for its biggest losing week ever, as it plunged 64% in three days.

So where does this leave us as traders or individuals who has money on the forex market. Well, it puts us in a very good position. This volatility provides traders like me, the opportunity to trade and make profit. Most people are under the impression that the volatility created on the market is bad because it moves fast and can take you out in seconds...they would be right. However, this would be true for novice traders. As a seasoned trader you should have clear and precise risk and money management that is able to protect you from these types of quick and sudden moves.

As a trader I adhere to very conservative risk management rules which only allows for 1-2% risk per trade with a total maximum risk of 5% at any given time. This approach ensures that the potential of negative impact from high volatility on the markets can be diverted really easily.

So in a nutshell, volatility...it’s a good thing, you just need to have the tools in place to benefit from it.

#Forex #Greekbanks #Riskmanagment