Strategies to manage lower Market Volatility and PA | Forex Factory

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Attachments: Strategies to manage lower Market Volatility and PA
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Strategies to manage lower Market Volatility and PA

  • #1
  • First Post: Oct 17, 2013 3:12am Oct 17, 2013 3:12am
Sorry in advance if this sounds really stupid.

EUR/USD
I am a day trader and have been trading live since 2010, I've had quite a bit of success during 10-11 as I could catch moves one or two 40-50pip breakout moves a week and the daily trading range seemed to be around 100pips. If you look even earlier in time the rangers were even larger.

However the last 2 years especially this year I have started to struggle as there just doesn't seem to be as many opportunities for me. I have a win rate of around 40% but my risk:reward ratio is 3.1-1. However recently because of the lower PA this year I haven't been been able to maintain my R:R.

Long story short what i'm asking is do you guys think that volatility and PA will be higher again over time in the future? Or maybe its just me.

Thanks.
  • #2
  • Oct 17, 2013 3:19am Oct 17, 2013 3:19am
Quoting Onitay
Sorry in advance if this sounds really stupid. EUR/USD I am a day trader and have been trading live since 2010, I've had quite a bit of success during 10-11 as I could catch moves one or two 40-50pip breakout moves a week and the daily trading range seemed to be around 100pips. If you look even earlier in time the rangers were even larger. However the last 2 years especially this year I have started to struggle as there just doesn't seem to be as many opportunities for me. I have a win rate of around 40% but my risk:reward ratio is 3.1-1. However...
The only cure for the low volatility I have found are the options. They provide you with a leverage that overcomes the negative effects of the smaller price moves. For example 5-6 pips move gives you 1:3 or better R/R ratio. You trade the same set ups but with different financial instrument.
  • #3
  • Oct 17, 2013 3:31am Oct 17, 2013 3:31am
What sort of analysis can you apply to forecast moves as little as 5-10 pips? With the random noise alone of hedging & purchasing transactions isn't it really difficult to get right?
  • #4
  • Oct 17, 2013 4:34am Oct 17, 2013 4:34am
Quoting TranceTrader
What sort of analysis can you apply to forecast moves as little as 5-10 pips? With the random noise alone of hedging & purchasing transactions isn't it really difficult to get right?
The purpose of the analysis is not to catch 5-10 pips move. You can trade any set up, but if the price moves only 5-10 pips with spot position you'll end up with small profit or BE. If you trade the same set up with binary option you can make 30 or 40 pips for example or even more.
  • #5
  • Oct 17, 2013 5:32am Oct 17, 2013 5:32am
Quoting Onitay
Sorry in advance if this sounds really stupid. EUR/USD I am a day trader and have been trading live since 2010, I've had quite a bit of success during 10-11 as I could catch moves one or two 40-50pip breakout moves a week and the daily trading range seemed to be around 100pips. If you look even earlier in time the rangers were even larger. However the last 2 years especially this year I have started to struggle as there just doesn't seem to be as many opportunities for me. I have a win rate of around 40% but my risk:reward ratio is 3.1-1. However...
Quote
I have a win rate of around 40% but my risk:reward ratio is 3.1-1.
That is terrible! You need to have a win rate above 80% with that R:R.

You need to keep an eye on other pairs. EURUSD has not had the nice moves lately.
GBPUSD has had much better moves.
Keep an eye on Gold. A lot of people don't like to trade Gold because of the 5 point spread
But look at the 1st hour range of the London open today.
EURUSD range was about 74 pips
GBPUSD was about 87 pips
Gold was about 437 points, making the 5 point spread insignificant.

Earlier this year EURJPY was the pair to trade for the big moves.
Please Do Not PM Me With Coding Enquiries
  • #6
  • Oct 17, 2013 9:38pm Oct 17, 2013 9:38pm
Quoting Onitay
Sorry in advance if this sounds really stupid. EUR/USD I am a day trader and have been trading live since 2010, I've had quite a bit of success during 10-11 as I could catch moves one or two 40-50pip breakout moves a week and the daily trading range seemed to be around 100pips. If you look even earlier in time the rangers were even larger. However the last 2 years especially this year I have started to struggle as there just doesn't seem to be as many opportunities for me. I have a win rate of around 40% but my risk:reward ratio is 3.1-1. However...
Maybe pair selection is your problem: There's not enough of it in your case. You seem to be restricting yourself to only EURUSD when there are other pairs.

Suggestion: Look for other pairs with higher volatility or at least with higher average daily ranges (ADR). And don't be afraid of the weird crosses either, just as long as you look for the ones with not-wide spreads (e.g. less than 3 pips on average.)
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #7
  • Oct 30, 2013 10:09am Oct 30, 2013 10:09am
Spread your focus among other pairs. Some of those pairs have been listed here for your. I favor the E/$ pair, but trader others as well. The volatility
will return, but in the mean time there are other pairs that can keep you plenty busy. Best of trade to you in the future.

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  • #8
  • Oct 30, 2013 11:21am Oct 30, 2013 11:21am
Quoting Gumrai
That is terrible! You need to have a win rate above 80% with that R:R.
I think he might have meant it the other way around.

Depending on your strategy, the volatility shouldn't affect you too much. You might be gaining less pips so your tp has become smaller but surely your sl has become smaller too thus your RR ratio should stay fairly similar, this has just been my experience anyway.

Another thing is volatility does not equal profit, adjust those lot sizes to the smaller pip ranges and you should make the same amount of money as you were in volatile times.

You have brought up a good subject, you found something that works for you and have stuck with it so far but the markets change and we must adapt. Luckily you have identified it and can now find a solution which I am sure you will.

That's why people who blindly follow a set of hard strict rules that someone has shared with them will never work, yes it might work in the beginning but one day it will stop working and they will wonder why it has stopped working but they won't know why because they never learned why they are following those specific rules or why those rules were working in the first place.
  • #9
  • Oct 31, 2013 1:59am Oct 31, 2013 1:59am
mmaker, I must've missed your last post here before you deleted it (?).

Did you find the answer elsewhere for the question you asked me?

In any case, I don't use a spreadsheet for my purpose.

I'm using the Display Info All Pairs indicator HERE to sort by 5-day ADR and filtered further to show spreads of 3 pips or less, all in real-time.

(Well, actually 6-day ADR, because hanover calculates ADR a lil bit differently than normal, but that's ok with me. )

I set it to show me something like the following:
Attached Image


You mentioned looking at pairs from the following "EUR, GBP, AUD, CAD, USD, JPY, NZD, SEK, NOK, TRY, SGD" bases? You can easily set the indicator to show pairs from these (depending on the pairs actually available at your MT4 broker).

It can be a bit of drag on the CPU depending on how many FX bases you include or how many other indicators you have running or how many other charts you may have in a single profile. If you have more than one chart in a profile, I recommend having the indic on only one chart.
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #10
  • Last Post: Oct 31, 2013 4:25am Oct 31, 2013 4:25am
I feel ya. The only cure for this is to use volatilty based position sizing so that you can take a larger position on a low volatile market.The other big thing is that if your trading method is sound it will work on most timeframes coz markets are fractal.Trade lower timeframes (5-15m) when volatilty is dead.Low volatilty occasioned by abrupt 3sigma+ moves are here to stay.Adapt
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