{"id":108048,"date":"2017-06-28T04:03:50","date_gmt":"2017-06-28T08:03:50","guid":{"rendered":"http:\/\/countingpips.com\/?p=108048"},"modified":"2017-06-26T09:19:27","modified_gmt":"2017-06-26T13:19:27","slug":"adaptability-to-volatility","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/06\/adaptability-to-volatility\/","title":{"rendered":"Adaptability To Volatility"},"content":{"rendered":"
June 28, 2017<\/div>
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By\u00a0ProfessionalTradingSystems.com<\/strong><\/p>\n

Financial markets are a constantly changing environment that requires from the successful traders to be adaptable to the changing conditions. Periods of large (volatile) movements are followed by low activity and small movements.<\/p>\n

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\nFig. 1 – Large daily movements. Typical for these periods are large daily fluctuations in price.<\/p>\n

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\nFig. 2 – Small market movements. Typical for these periods are small daily fluctuations in price.<\/p>\n

Placing our Stop Loss orders is an important part of a successful trading strategy. These Stop Loss orders should be selected so as to be in line with current market conditions. When we have large movements, we use a large Stop Loss that is far from the market price, and vice versa – when we have small market movements, we use a small Stop Loss that is close to the price.<\/p>\n

To do this, it is very appropriate to use the indicator Average True Range – ATR that measures the volatility of the market for N periods backwards. It looks like this:<\/p>

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Free Reports:<\/p><\/div>\r\n

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<\/a>\r\n\t Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p>

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<\/a>\r\n\t Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p>

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It is available on any trading platform as a free indicator, so it is applicable by everyone and does not require additional installations.<\/p>\n

Returning to Figure 1 that shows a volatile market, we will see that the 10-period ATR has the value of 170-220 pips in this cycle of the market behavior. The same indicator shows a value of about 50 pips when we have a quiet market. Difference reaching 4 times! It is considerable, isn\u2019t it?<\/p>\n

If we choose to trade using a fixed Stop Loss in pips – say 40 pips, it would be adequate only when the market is quiet. In a volatile market, we will be often thrown out from the market, which will lead to losing trades. The same applies if we also choose a large Stop Loss – 150 pips. Then it would be inadequately large when we have small market fluctuations.<\/p>\n

In order to place an adequate Stop Loss, we from ProfessionalTradingSystems use a ratio of 10-period ATR for its calculation. This ratio varies depending on the trading system, but if we assume that it is 0.5, then in a volatile market we would use a Stop Loss of 85-110 pips, and in a quiet market -25 pips.<\/p>\n

The ratio of the 10-period ATR is a very suitable tool that allows us to keep abreast with what is happening in the financial markets in an automatic way, without having to anticipate if we are to have a quiet or volatile market.<\/p>\n

Using an appropriate Stop Loss is one of the distinguishing characteristics of successful trading systems.<\/p>\n

Adaptability to the volatility is a conception that we from ProfessionalTradingSystems use in\u00a0all our systems!<\/a><\/p>\n

Article by Professional Trading Systems<\/strong> – \u00a0Forex Mechanical and Automated Systems<\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By\u00a0ProfessionalTradingSystems.com Financial markets are a constantly changing environment that requires from the successful traders to be adaptable to the changing conditions. Periods of large (volatile) movements are followed by low activity and small movements. Fig. 1 – Large daily movements. Typical for these periods are large daily fluctuations in price. Fig. 2 – Small market […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-108048","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/108048","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=108048"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/108048\/revisions"}],"predecessor-version":[{"id":108089,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/108048\/revisions\/108089"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=108048"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=108048"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=108048"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}