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Understanding Volume And Volatility. Traders Need To Know This.

Our goal is to steer you in the right direction and help you avoid making losses that you don,t need to make by not understanding fully how financial markets and the whole industry works.

So in today’s lesson i am going to reveal something that a lot of traders get wrong of and get confused leading to burning out accounts, but those persistent who still in the game stay long enough and eventually figure it out. But in those early stages of trading where new traders get confused and end up dawning there accounts in bigger problems most of them quit and never get to figure it out.

So it is all about VOLATILITY AND VOLUME.

Let us start with VOLUME. So you hear most traders traders say “I am trading the major pairs because of how liquid they are” Now if the pair is more liquid it simply means there is a lot of volume so if i execute an order, it is more likely to get filled the second i want it to happen right? But if you go through a less liquid market you’re orders are most likely to delay before it actually happens. This means the particular market has low volume and less participants.

So technically if the market has many buyers and sellers, you are going to get filled easily. This also means if you are expecting a certain pattern to occur in the market, it is more likely to do so because of the amount of participants who are involved in it. An individual trader sitting on his/her laptop is like a piece of sand in a ocean and literally has no effect at all but when number of traders starts to pile up in the same markets thus when there decision has an impact in the direction of the market. Example of these High volume Markets are EUR/USD, GBP/USD, AUD/USD NZD/USD and the remaining major pairs few to mention. In Indices we are talking about the NASDAQ 100, GER30, Volatility Index etc. In commodities we are Talking about GOLD, SILVER and OIL.

Now with VOLATILITY its all about the pace of the market. How fast the market is moving from one price to another. So when that’s happening your position size is moving relatively to the size of the movement to the market. When movement is much bigger you need to have a reasonable stop loss to allow fluctuations of price. In that case volatility is not a big issue but many traders are so focused on volatility instead of a just right market and slow down our decisions not making them too quick to actually destroy.

Volatility makes traders greed and makes us think we are about to be left by a train but literally volatility always lasts few seconds to minutes and it gone. Here then comes in play the VOLUME which is mostly depended by large financial participants on a day to day trading operations.

Many traders who come into trading get tempted with volatility and end up hitting a rock. But in real sense the high volume markets (Pairs) has got less volatility compared to the low Volume Markets (Pairs). This concept should be known to traders from the very beginning. Volatility just gets things done but volume is the engineer of all.

That’s all for today Folks if you have a question Opinion leave it on the comment section and i will be happy to respond.

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