Increasing Levels of Forex Volatility

Under stable market conditions, placing a 2 lot position, whilst seeking a profit of 50 pips, may be an acceptable action should the size of your account support it. However, during more volatile times when potential losses could be as large as 100-200 pips or more, this strategy ceases to be so attractive as its begins to offer deteriorating risk to reward ratios. Under such circumstances, you need to take corrective actions in order to reduce your potential loss exposure such as reducing the lot size of your trading positions

Traders should always follow their predetermined trading strategy

regardless of the market conditions. During volatile times, you should enforce this principle even more as well as understanding the importance of using increased levels of restraint. As the pressure on you intensifies with increasing volatility, you must attempt to adhere to the key features of your Forex trading strategy such as its activated stops, contingency plans and risk management benchmarks without hesitation. This will help you to define your levels of risk should price action become more unpredictable. Without strict discipline and self-control, losses can be very significant during volatile times to the point that your entire budget could come under threat.