FX derivatives markets have sent volatility prices for the US Dollar and broader counterparts to multi-month highs ahead of a highly-anticipated US Federal Reserve interest rate decision.
High volatility expectations warn that market conditions will likely remain challenging in the days ahead. Past performance is not indicative of future results, but our data shows that the majority of retail traders tend to do poorly during fast-moving markets.
This is due to the fact that most tend to range trade—buy low and sell high. Again we need to emphasize that past performance does not guarantee future outcomes.
Yet high-volatility systems tend to outperform when volatility expectations point to major exchange rate swings. See the table below for full detail on market conditions and preferred trading strategies.
Understand the Breakout2 Trading System via our previous article. Auto trade the trend reversal-trading Momentum2 system via our previous article. Trade with strong trends via our Momentum1 Trading System. Use our counter-trend Range2 Trading system. Contact David via Twitter at http: Volatility Percentile — The higher the number, the more likely we are to see strong movements in price.
This number tells us where current implied volatility levels stand in relation to the past 90 days of trading. We have found that implied volatilities tend to remain very high or very low for extended periods of time. As such, it is helpful to know where the current implied volatility level stands in relation to its medium-term range. Trend — This indicator measures trend intensity by telling us where price stands in relation to its 90 trading-day range. A very low number tells us that price is currently at or near day lows, while a higher number tells us that we are near the highs.
Bias — Based on the above criteria, we assign the more likely profitable strategy for any given currency pair. A highly volatile currency pair Volatility Percentile very high suggests that we should look to use Breakout strategies. More moderate volatility levels and strong Trend values make Momentum trades more attractive, while the lowest Vol Percentile and Trend indicator figures make Range Trading the more attractive strategy.
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