The trades you enter during periods of high volatility might be different to the trades you make when volatility is lower. Generally speaking, traders use volatility indexes to measure the level of risk, fear and stress in the market. We offer GVIX.
GVIX is the Gain Volatility Index, a composite of the volatility of the most popular markets across asset classes. GVIX is a composite metric meaning it is based on a number of underlying markets.
The 6 markets are : EUR/USD, GBP/USD, USD/JPY, Germany 30, Wall Street and Gold. The contributions of each market are re-calculated each day based on their 23-day rolling trading volumes.
To analyse your performance under different scenarios, we have defined high, medium and low as follows:
路 low: <1%
路 medium: 1% - 1.5%
路 high: >1.5%
Here is a trader with a strength during low volatility and a weakness during high volatility. When the markets are quiet, the lower stress levels make for a more optimal performance for him as he is less likely to act on excitement or the fear of missing out.
As high volatility is a weakness here, it鈥檚 important that this trader looks to manage any large outlier losing trades that contribute to losses.
Alternatively, if high volatility is a strength for you, you should ensure your trading strategy plays to this strength in order to maximize your performance.