Understanding the Currency Volatility in ETF Trading

Currency volatility is a vital factor that can change the market situation rapidly and frequently. If the investors understand and maintains the volatile position with care, currency trading will be significant to get more profit. In this article, we will learn about the volatility of the market and currency. The strategies that can improve profitability are also disclosed in this article.

Volatility in trading business

In general, the measurement of the extent and frequency of change in the currency value is known as the volatility. It is actually the measurement of the standard deviation when the currency’s value deviates from the average number and volatility can easily change the selective measure. Higher and lower volatility depends on the trending market situation. A higher volatility means a higher rate of risk in a trade deal during Forex trading. It also creates more opportunities to move the price range which eventually helps investors in Hong Kong to find more profitable trade setups.

Identifying the currency volatility

It is hard to identify the volatility of a currency because it is very unpredictable. But some methods can help you to measure the volatility and the probable situations depending on the characteristics of currency trading. For the accurate measurement, the differentiation of volatility should be known about. The implied volatility and the historical volatility are the two different types. Implied volatility is the measure of future expectations of traders in Hong Kong, whereas the historical volatility can be measured by past performance. This analysis can help form a good relationship between the market expectation and the volatile condition of the market.

 Difference between risk and volatility

Most investors in the ETF industry do not know the difference between risk and volatility. They often think they are both the same thing. There are some noticeable differences between risk and volatility. Risks in any business can be controlled but the volatility cannot be. Business people can manage the amount of risk by learning about the market situation. But there is a close relationship between these two. Dealing with volatile currencies can carry risk because the price movement happens only in one direction within a suitable time frame. 

Massive moves can magnify the loss as well as gain the profit. Herd mentality can increase the trading suitability in a vulnerable situation. The same action from making different mistakes cannot solve the problem. Traders must be careful about the pros and cons of this business; otherwise the risk management will not be possible. When the market is volatile, the professionals and the experienced businessmen often use their own thoughts and understanding to navigate the process. The minimum amount should be recovered by the smart investors though there is some loss of profit.

Tips to overcome the volatile situation

The market’s volatile situation can be overcome if the traders follow and maintain the rules and methods. This is the reason that professionals often tell people to follow a suitable trading strategy. Some tips can help investors to minimize risks and prevent massive losses. These tips are as follows.

  • Effective use of the indicators and charts
  • Proper analysis of stop loss
  • Clinging to the trading strategy and tactics
  • Knowing about the news and events on this business
  • Keeping to a lower position size
  • Always maintaining a trading journal

Different technical indicators can anticipate changes in economic condition and changes in the value of a currency. The other outstanding practice is to keep the stop loss to minimize the risk in Forex. The stop loss can make the scenario totally different to manage the risk. The position size can also affect the trade deal.  A smaller position size will make the stake less than 5% of a trading account.


Your Forex trading will be smooth if the risk and volatility are managed in a balanced way.