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| Module 6: Grid trading success factors: Volatility of currency |
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The volatility of the currency .
In order for the grid system to work the price has to move and through many grid lines or levels. The biggest trick is to match the Grid gaps with the volatility of the currency. If you use a large grid gap with a low volatile currency you may only have 1 or 2 transactions a month. If you have a small grid gap with a highly volatile currency you run the danger of having too many open hedges. .
A guide to measuring the currency volatility is to look at the currencies average daily range over the last few months or to look at the range of the currency over the last few months. .
For more information on currency volatility please click the following link:- http://forextradeoftheday.com/trading-ranges-of-forex-crosses-over-the-last-10-months/ . Using the inappropriate grid sizes is the biggest cause of grid trading failure. There is always a temptation to go for smaller grid gap sizes. this works well in a sideways trading market but small grid gaps can result is serious exposure to losses in a trending market - although as we will see later on in course there are many ways of managing this risk. .
A general rule of thumb is to use a grid size of between 8% to 10% of the range that the currency has been trading during the last 12 months.
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. Please Email us with any comment or questions you may have regarding this module of the Grid Trading Course by clicking here> This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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