Market volatility is the magnitude of price changes that indicate market fluctuations in a certain period. It’s called “market mood” because you will see prices can jump sharply or even freefall weakened, which means there is high volatility. Meanwhile, when the market is calm, it means that there is low volatility where no seller or buyer dominates the market. You can visit http://www.volatility75.net/ if you really are interested in understanding market volatility better.
Then you also have to understand that profit opportunities are directly proportional to risk opportunities. When there is high volatility, you will get a large profit opportunity because the price will move far from the previous closing price. But this is directly proportional to your risk opportunity because no one can hold and predict market movements. It’s time for your stop loss to play a role.
Furthermore, the use of stop-losses is also very important in handling volatility. When the profit opportunity is directly proportional to the risk opportunity, then to anticipate an uncontrolled loss you can place a stop-loss position that is smaller than your target profit level.
You also have to understand that fundamentals affect volatility. Volatility increases when there is new information that differs from market expectations during the release of data from one of the important events in the economic market. Brokers usually provide an Economy Calendar to inform data release schedules or important events that can trigger increased volatility. In the forex market, there are 4 United States Economic Data that have a big influence as a determinant of market sentiment.
Market volatility must also be the main focus of traders. You can take advantage of high volatility during the trading session meeting every day (overlap) where the forex market liquidity is high or when important news releases such as US economic data. While low volatility will occur during national holidays such as Christmas, Thanksgiving, New Year, and others.