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 Many financial specialists consider that market volatility is currently the most dangerous element in forex trading. The market volatility consists in high variations of asset rates in a very short time. Few years ago the market volatility was very easy to predict and therefore to deal with.
The London foreign exchange market is known as the largest forex market worldwide, usually having a share of 30% of the global forex market. Major financial institutions and central banks trade in London so as a direct consequence the global market volatility is higher during London market hours. All experienced traders take that into consideration when they decide upon the trading strategies.
Besides the trading hours influence, the high volatility levels on forex market had also been triggered by important news in economy, finance, politics and even natural disasters. The traders are humans and they always tend to respond to high impact news whether negative or positive. In the recent years the forex market expanded based on two ways: trading volumes and number of traders. More and more traders entered the market most remaining at the amateur levels but being such a large number of traders in this beginner’s category they can influence the market. Financial analysts say that amateurs are more fearful to bad news and more excited to good news. That is why now the forex market is more volatile than ever before.
If few years ago high market volatility was expected during certain times or as a consequence to important news, nowadays the forex market volatility can be easily observed after less significant financial, economic or social events occur. The forex market volatility cannot be defeated so all traders must get used to it and take it into consideration when deciding upon short term or long term trading strategies. A good risk management can counterbalance the market volatility ensuring positive trading sessions. |
