Now that the dust seems to have settled after this week’s crazy events, are the markets going to stop and are there any lessons to be learned from this?
Many traders find it easier to make money in a trending or highly volatile trading environment.
Strong trends and volatile currency pairs usually offer the best opportunities using classic “buy low, then sell high” strategies.
However, being consistently profitable when nothing happens is a bit more difficult.
You have to adjust your volatility expectations (and therefore your position size) and the price reactions of your major currency pairs suddenly become less predictable.
Applying tried and tested trending strategies can also lead to losses, which can lead to even more problems with trading confidence and execution.
Does this mean you should avoid trading on low volatility days?
Maybe finish your Netflix series or take up new hobbies like streaming and creating viral TikTok videos?
NO!
Becoming consistently profitable means making profits even when market conditions are not ideal for existing strategies. Fortunately, trading quiet markets can also teach you three traits that will make you a better trader:
1. Patience
Finding trading opportunities when prices aren’t moving as much as you’re used to usually leads traders to overbid or enter trades, even if they’re not well supported by fundamental and technical analysis or don’t have favorable odds.
However, you will eventually learn that being profitable means being more selective in the settings you accept.
You will learn that it is better to wait for one good trade than to take chances with half-baked trading ideas. The discipline you acquire will help protect you from overtrading and will prove useful in all types of trading environments.
2. Flexibility
Just as a chef changes his menu according to what is in season, consistently profitable traders also learn to change their trading strategies according to the current market environment.
Of course, there is nothing wrong with specializing in trend spotting strategies. But if you want to make profits year-round, you also need to prepare to expand your skill set beyond the usual buy low, sell high program.
Read about Countertrend, Breakout and Range Strategies if you’re just getting started!
3. Adaptability
The biggest and most predictable driving forces in a trending environment may not be the best pairs to trade when volatility decreases. Trading in a quiet market forces you to identify new opportunities that you can take advantage of.
Do other currency pairs move more predictably than your underlying assets?
Is it better to trade during another trading session?
Should I focus on another indicator when determining low volatility trade setups?
These are some of the questions you will be able to answer when you practice trading in non-trending conditions.
Remember that how you trade the setup is just as important as the setup you are trading.
You don’t have to wait for perfect trading conditions as long as you’ve mastered the art and science of spotting setups with good risk-reward ratios and learning how to execute your trades according to a plan.
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