Traders are using software with trend following strategies may not often get a signal lately, or the previous strategy can work well now less profitable. The reason is that market volatility tends to be low lately, even the decline in the volatility of the forex market has been indicated since the beginning of this year of the average daily range of a few major currency pairs tend to fall.
In general, traders expect market volatility high for several reasons:
1. high volatility does increase the level of risk, but the opportunity for entry will be even greater.
2 The increase in volatility will lead to higher price fluctuations so that the trader can determine the risk / reward ratio is in line with the increasingly large trading range.
3 For the medium and long term traders will be easier to anticipate price movements in sentiment and market volatility high.
4 For scalper or day trader who target number of trades per day of high volatility will be more profitable because in the short-term fluctuations in the direction of the price movement will tend to be more predictable.
5. correlation between currency pairs will be clearly legible.
Besides trading algorithms for different low volatility with high volatility. Trading algorithm is a systematic procedure that is followed for entry and exit, which is adapted to the strategy and trading plan. When volatility changes, traders should adjust their trading strategies.
Low volatility of the forex market lately mainly due to geopolitical risks in some countries which dragged the United States, Russia and the European Union, as well as the outlook for global economic growth tends to fall. Deflation has attacked the Euro area and Japan while Britain and the United States still run stimulus program to spur growth. The low volatility of the market can be seen from the range of average daily EUR / USD, which is the pair with the highest daily trading volume:
In addition, the volatility index (VIX) for the forex market also shows the lowest level since last 10 years:
