Why Do We Need Volume and Volatility in the Forex Market?

In this video:

00:24    The importance of volume within the market
02:38    7.9% gain in one day – just an exceptional return
05:20    How to trade for yourself the way that I trade

The Importance of Volume and Volatility in the FOREX Market

Why do we need volume and why do we need volatility in the FOREX markets to help us as FOREX traders? Let me explain more about that and a lot more about results that I’ve been achieving right now.

 Hi traders, it’s Andrew Mitchem here the owner of the FOREX Trading Coach. Today is Friday, the 1st of August.

 In today’s video and podcast I want to explain to you the importance of volume within the market.

 It’s not something we can measure as such but when you have a lot of activity, a lot of volume in the market, a lot of traders trading in the market;

  • It gives volatility

  • It gives big moves within the market

And that’s really what most of us need in order to be really profitable. You can be profitable in tight range-bound markets but for most systems to work you need that extra volume and volatility and that’s luckily what we’ve seen come back into the market in the last week or so. You would recall that on my video and podcast last week I was talking about how I’ve made 6.7% in the week and that was an exceptional return considering that July is traditionally a low volume, quiet month of the year due to the Northern Hemisphere holiday season.

7.9% Gain in One Day

But this week I’ve gone even better. On Wednesday of this week, I made 7.9% on closed trades in one day.

Now, that of course is not something that I achieve very often (if only). But reality is that doesn’t happen very often but it just goes to show what can be achieved if you stick to your system and you don’t change the rules and you have some volatility in the markets that aids you but of course you need to be on the right side of those trades and you need to have the strategy upfront to be able to identify those trade setups. And of course, you also need to have the confidence within your system and your strategy to take those trades before the market makes those moves.

It’s no good in saying, “Uh, I would have made 7.9% in a day if I had done this or if I had done that.” Because the – I would have, could have, should have; means nothing on your bottom line and your bank balance.

The reality is: “I did make 7.9% in a day because I’ve got the strategy in place; I’ve got the confidence in the system. I see the trade, I take the trade, I have very low risk per trade, I was trading at a quarter to a half of 1% per trade depending on which of the trades I took. But a 7.9% gain in one day is an exceptional return with very low risk.

Now, that leads onto something else. As I’ve explained several times over the last six months or so, this year has been a very hard year for trading. It just has been. It’s been, not a huge amount of movements in the market. The volatility and the volume have been low.

2014 BarclayHedge Rankings

What I have here is a printout of the Barclay Hedge Rankings which ranks the Top 10 currency hedge funds within their world or at these guys rank which is pretty much all the top ones. This is for July so this goes up until the end of May, so up until the 31st of May – this is published in July, just out. Now for all those companies trading more than $10million combined funds, the highest return for the month of May was +4.67% and the highest out of those top 10 in the whole of 2014 is +15.31%.

Now on that list there are only 4 out of the 10 who’ve got positive figures for that overall performance for 2014. One of them has a -11.77% return for the year. And I’ll read the list -2.7, -11.77, +15, +9, +1, -1, -7 etc., it goes on like that – so not tremendous returns. Now I’m not knocking any of these guys because I don’t know who they are and I’m not saying that they’re bad. I’m just saying that the conditions have not been favorable for most systems as currency traders.

Go to the bottom half of the table. Those trading between 1 and 10million – there’s one at +18% for the year and the rest are -8, -2, 0.47, 1.47, -2, -4, -2 etc. So again it doesn’t matter whether these guys are trading millions and millions of dollars or trading just 1 or 2 million dollars. A lot of those bigger companies are finding this year very tough so when I come back and  I look at the results of +6.7% for last week and +7.9% just for Wednesday this week, it just goes to show what an awesome (in my opinion) – an awesome strategy I have. I’ve been trading for 10 years now. It’s not something that’s just plucked out of the sky, this has been worked and developed and evolved over time.

Free Webinars

If you’d like to learn how to trade for yourself the way that I trade, what I strongly urge you to do is to jump on to one of the free webinars that I hold each week. If you’ve been on one before then I see no need to jump on them again because they’re the same webinar, just held a couple different times of the week to allow you to jump on to whichever of time zone that suit you.  But I hold webinars for brand new people to trading and I also hold webinars for what I called the “frustrated” trader which are someone who’s been trading for 6 months, 12 months or couple of years and still not cracked it and still not making money because my aim as a coach is to help my clients overcome that hurdle of being either a “beginner” or “frustrated” and to become profitable traders in their own right.

Of course there are some backups and some guidance initially especially from myself. A lot of help and guidance given upfront but overall my aim as a coach is to have my clients and my students trading for themselves, by themselves and taking good care of their own financial future because ultimately that’s what almost all of us as currency traders want. We want, obviously, the lifestyle it goes with trading, the ability to trade from home, if you wish, the ability to travel – we all know those potential benefits but there needs the monetary benefit as well and so results are really what counts and results are what I aim for my clients to achieve.

So this is Andrew Mitchem from The Forex Trading Coach.

Don’t forget non-farm payrolls, today being the 1st Friday of the month. Look out for any open trades at that time. Have yourself a fantastic weekend. I look forward to bringing you a lot more FOREX tips and information and advice this time next week.

Bye for now.