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How to Prosper Trading in a Low Volatility Forex Market

It doesn’t make me happy to have to reprise this article but after seeing EURUSD trade a weekly range this week of less than 100 pips (i.e. 98 pips), I feel compelled to post it again. For those who have read this article before, I suggest reading it again as a reminder of ways to not only survive but thrive in a low volatility environment.

It doesn’t seem to be that long ago that 100+ pips in a currency like EURUSD was a typical daily range. Well, times have changed.  As traders we can only deal with the hand we are dealt and currently, that is a low volatility forex market. This does not mean you can’t prosper trading in this environment., It only means you have to adapt.

One reason for lower volatility and limited trends may be that forex trends tend to be strongest when economies are out of sync. However, in the post-pandemic world, global economies are all expanding. This leaves the focus on how central banks may respond to rising growth and inflation by tapering bond purchase and/or raising rates.

Whatever the case, the result has been a low volatility forex market that seems to be characterized by false starts or fits in starts when there are trends. So, let’s take a look at how you can prosper in a low volatility trading environment.

How to Trade in a Low Volatility Forex Market

Are you frustrated by tight ranges and getting chopped up when currency rates do not move much? Are you frustrated by the lack of strong trends and limited follow-through? Are you looking for trading strategies you can use in the current environment of low volatility? Here are 8 suggestions you can use to help you trade in a low volatility forex market with a ninth added in as a bonus.

If you are trading the forex market recently, it is hard to not recognize a lack of volatility that has frustrated not only trend traders but day traders as well. While there are pockets of volatility, more often than not they are followed by limited follow through and choppy ranges.

I look at low volatility as a market characterized by tight ranges and limited follow-through with false starts in both directions. It is a matter of adapting if you want to survive trading in this environment and I have come up with 8 strategies designed just for this purpose.

 So, the question is, how do you trade in a low volatility market and survive when prices don't move much? Without getting into a long discussion, here are some suggestions for trading in this type of market.

  1. Be realistic: Identify the type of market you are in and take what the market will GIVE to you, not what you HOPE it will give to you.
  2. Look to take profits sooner in a low volatility market than when markets are trending.
  3. In a low volatility market, it is hard to make losses back so be selective and look to trade the strong sideof the market. I define the strong side as the side where there is less chance of getting caught in a run through stops. as the forex market has an insatiable quest to run them. Note, currencies will settle into relatively tight ranges when there are no more stops to run for the day.
  4. Look to trade when you can identify a stop not based on how much you are willing to lose but one that will keep you in a position, thereby giving your trade time to work. I call this trading on the strong side of the market.
  5. Stay alert! Be on guard for those days where there is news that can shake the market out of its slumber. Don't trade a range day when news and/or technicals suggest otherwise.
  6. News matters: Beware of headlines and what side is more vulnerable to a surprise. Look ahead to what news is coming out as that will give you a clue how the market is positioned ahead of a key news event. It is often safer to trade in anticipation of how the market will position itself ahead of a news event rather than trying to trade on the actual outcome. In any case, be on alert for a day that may not be low volatility.
  7. Beware of tight ranges as small moves within it can exaggerate a swing in your sentiment and lead to ill-advised trades based on emotion.
  8. Don’t be complacent!In other words, don’t get lulled into giving up on the day as markets may move when you least expect it.

Low volatility markets can be frustrating and it is easy to get chopped up in tight ranges if you bet on breakouts but the history of the forex market is that they do not last forever. However, while volatility stays low, adjust your trading strategies so you can build a cache of profits so you can take some risk when market volatility picks up.

  1. My suggestion: At the risk of making this seem like a promotion, I can only speak from my own experience and that is you need something that can work for you in all types of markets, including low volatility In this regard, if you are serious about trading, you must consider the following, which can be used to take advantage of the suggestions described above. I suggest taking a serious look at our

Amazing Trader and its AT Trading Study Guide  (includes 2 months AT access)

My best endorsement is that I cannot trade without it and am sure you will feel the same once you try it.

Feel free to contact me with any questions or to inquire about any special promotions.

Jay Meisler, co-founder

[email protected]


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