Monday, 20 June 2016

Why Is Volatility A Trader's Best Friend?

Learn how to take advantage of volatile markets and why you should view volatility as your best friend.

 Why is volatility a trader's best friend?

When trading forex, currency pairs react to market conditions... When people get overly greedy, the price goes up, and when people become fearful, the price falls.

What is volatile? Volatility is a statistical measure of the tendency of a market or security to rise or fall sharply within a short period of time. Volatility is typically measured by the standard deviation of the return of an investment.

Human beings have not changed for thousands of years. We have certain instincts built into us that make us do things we have almost no control over, and fear and greed are two of those emotions.

Buy when people are greedy & sell when they are scared. 

It's often been said that when you look at a chart, what you are actually looking at, is human behavior. The never ending peaks and valleys that you see on a chart is human fear and greed being shown in numbers.

The idea that we could predict when people become too greedy or too fearful has fascinated analysts, mathematicians and traders since the profession has been invented. The reason it has fascinated them is because they all knew that the person who could predict those points on a chart would virtually own his own perpetual money machine.

Here's the big secret... Knowing when there is volatility is not the real advantage, because by the time you see the volatility, it's probably too late.

The real advantage is knowing when volatility is ABOUT TO HAPPEN. In other words, predict, before anyone else knows when the market is about to take off like a rocket or drops like a rock.