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Armada Markets, a global spot Forex and precious metals broker for professional traders notifies its clients to be cautious in their trading decisions as the period of record low volatility is about to end. Higher volatility will increase risks for all traders and Armada Markets advises its clients to reduce risks.
The notice is triggered by yesterday's release of Bank of England and Federal Reserve minutes of their last policy-setting meetings in which both central banks raised the possibility of a sooner than anticipated rate rise. In recent years most market participants have become overly comfortable with the low interest rate environment and should now revisit their risk management strategies. Changes in interest rate outlook and ultimately the rise of interest rates should bring and end to the low-volatility environment and introduce higher risk to the market.
All financial markets including FX, stocks and commodities have seen volatility indices hiting record lows in recent weeks as the low interest rate environment has created the illusion that markets can only move in one direction.
Why traders care about volatility?
Investors look at various volatility indices due to following main reasons:
- Higher volatility means more risks
- Higher volatility introduces also more opportunities for traders as market tends to fluctuate more and by a larger extent
- Some trading algorithms work only with low volatility while others need high volatility
- Risk management techniques need to be adjusted based on the changes in market volatility
- Higher volatility introduces more emotional stress for any trader
- In a higher volatility environment historical correlations between various currency pairs tend to experience short-term deviations
Quote:
Armada Markets alerts regularly its clients on major shifts in market dynamics or outlook. Armada Markets is proud to be the top choice for professional spot FX and gold/silver traders providing them with:
- Industry-lowest spreads with average EUR/USD spread of 0.3 pips
- Industry-lowest retail commissions of 20 USD per million
- Ultra-fast trade execution speed of 300 milliseconds on Metatrader4 platform
- Trading environment where all types of strategies including news trading, scalping and arbitrage are allowed
Data Sources
Forex Article : Record Low Volatility on Forex Markets About to End