Price Action Trading Forex in Low Volatility

Last night I held a webinar on trading Forex in the currently low volatility conditions we are experiencing. Below you will find the webinar along with extra information.

In the last few months, Forex has fallen to a period of extremely low volatility. At the moment, volatility is going back up. However, it will be a long climb before volatility reaches mid 2013 levels again.

For me and the forum members, these conditions have been fantastic. A lot of people see low volatility as a bad thing. However, if you know how to trade in it, low volatility can be great.

Why is low volatility great?

Well, one of the biggest reasons is that there are less surprises. Low volatility markets are much more relaxed and much more predictable. You may make less pips, but who care about pips…

… As a Forex trader you don’t measure your success in pips.

If Bob is making $100 per pip and Time is making $10 per pip, Tim needs to make 10x the pips Bob has to make to equal Bobs profits. You calculate profit and risk based on a percentage of your total trading capital. Since you can have much tighter stops in low volatility conditions, you can trade more lots. So less pips will equal the same amount of money.

Low volatility has been causing issues for a lot of traders. If you look at Forex forums, or trade following services, the performance of many traders has gone downhill.

Why?

Because these traders do not know how to adapt to current market conditions.

Adapting your trading to current low volatility conditions

One of the best aspects of trading price action is that price action works in all market conditions. There will always be a few changed you need to make, but with price action those changes are minor.

The main changed I have made to my strategy in the last few months are as follows.

I have tightened my stops and targets.
I have tightened the space between my support and resistance areas.
I have been adjusting my support and resistance areas weekly as opposed to monthly.

These are all the changed I had to make to adapt to current market conditions. In the video below I will show you my strategy in action. Before I do that, I want to talk a trade that a viewer of the webinar alerted me to during the webinar.

The EUR/GBP Long

After last nights webinar, a whole lot of trades triggered. This was no surprise as the massive move caused by the European interest rate news had to retrace at some point.

During the webinar, a webinar attendee spotted an awesome trade set up on EUR/GBP and asked me to check it out. This can be seen at around about the 37 minute mark on the video. Below is an image of the set-up during the webinar.

EUR/GBP Price Action Long Trade

This was an awesome reversal set-up. I was in two minds about entering it as NFP was coming up the next day. However, in the end I jumped in for a quick 23 pip gain.

EUR/GBP Successful Price Action Long Trade

I ended up entering this trade in bed at around about 6:00 am my time. I waited for price to retrace to around about 0.7927. I only entered this trade because I could get a very tight 10 pip stop on it. My first target was at the blue dotted line, which was 0.7952. Since NFP was nearing I ended up closing the full position at 0.7952 instead of holding out for a second target.

So, thanks Andrea for spotting this trade in the webinar!

An important thing to note about this trade is that I did not make any changes to my normal position size. So technically, this trade was not a huge gain. What do I mean by this?

Well, let’s imagine I normally risk 0.5% of my account on a trade with a 30 pip stop and a 60 pip target. If I have a 10 pip stop and a 25 pip target, I would still risk 0.5% which means I would need to trade more lots. In this case, I did not change my lot size, so the 25 pip gain was more like a 15 pip gain when compared to an average trade. Either way, profit is profit, so I am happy with the trade.

Some of the other trades taken on the forum were EUR/USD 8hr long and USD/CAD 6hr short.

We do not normally trade this close to NFP. However, for me, it was really hard to pass up on the opportunity to make some quick profits from the retrace of yesterdays fall.

Trading Forex in Low Volatility Webinar

That was pretty much the longest written introduction I have ever done for a webinar. I hope you got through it all though, I know you are anxious to see the webinar, so here it is…

My Free Price Action Strategy

If you want to know more about my strategy and how I trade, here are a few links.

Check out the Free Price Action Strategy section for a break down of my strategy.
Recent webinar on candlestick analysis in my strategy.
Recent webinar on how I place and use support and resistance areas in my strategy.
Recent webinar on how I use support and resistance together with candlestick analysis to enter price action reversal trades.

Questions?

If you have any questions as them using the comment form below. I try to respond to every comment.

1,002 comments

Alfredo Muñoz

September 6, 2014

Nick. First of all, let me thank you for sharing your knowledge about trading and besides for free. And hoping you’re getting better (about the flu)
As always, the webinar was an enriching experience.
A newbie’s (like me) question:
Would you like to explain in detail how is the way to handle de two targets in a trade? The steps (the mechanics) not the concept (that is clear)
Is it manually handled? (Market execution)
is it automatic? (Two pending orders?) a mix of both?
When you reach your first target close this position an immediately open your second position at the same pips level?
Is there a feature in the trading software to handle this?
Thank you in advance for your answer

Roberto

September 6, 2014

Nick, thank you for sharing your knowledges.

I have 2 questions:

1º => You wrote above that trade in low volatility is great. So, is it better to trade when London session and NY session are closed? (less volatility).

2º => If not, does it means that indecision candles are not valid if they are formed when London and NY sessions are closed? (in 4H time frame for example).

Have a nice weekend!

Dan

September 6, 2014

You mention that one shouldn’t trade 40k until you’re already trading successfully, but how do you know as a starting trader that you’re trading successfully?

I’m asking this since I’ve been trading for 3months quite successfully but I’m thinking that the time period is too short to say anthing definitive.

Awesome video btw, whish I could’ve been there live.

Nick

September 7, 2014

Hi Alfredo,

It depends on what trading platform you’re using. I use a mix of manual execution and pending orders. I depends on whether I am at my computer or not. If I am at home, I use alarms and manually exit. If I am out I use pending orders.

I am not sure how your broker handles it. However, what many people in the course do is buy two lots, sell one lot at first target, sell the next lot at the second target.

You do not open the second position at the first target. That would not be a good idea. Here is an example trade.

USD/CAD trade
Open 2 lots by buying @ 1.0900
Close 1 lot by selling @ 1.0950
Close 1 lot by selling @ 1.1000

Nick

September 7, 2014

Roberto, I think you are taking the low volatility thing too literally. I mean volatility as a whole, not intraday volatility changes.

For example, over the last few years average daily ranges have fallen from 300 pips per day to 100 pips per day for certain pair. This is a major change in volatility. I prefer ranges of 100 pips per day.

Intraday volatility is not important. I trade at any time of day. Since most of my trades are on large time frames such as the 8hr or 12hr, I have to trade all sessions. My trades usually run for over 24 hours. Limiting myself to one sessions would mean no trade.

Nick

September 7, 2014

Hey Dan, I would say one year of live trading a small account. For example, you could start with a £200 account, trade it for a few months. If that goes well, up it to £1,000 for a few months. If you are still doing ok up it to £3,000. So on and so forth.

It is important that you add money in small amounts. I have seen so many traders go from trading well on a £500 account, to losing on a £40,000 account.

There are many psychological factors involved in trading. Trading a small account is much less stressful than trading a large account.

So, there is no specific period at which you can suddenly invest a lot of money. Take it slow and add to your account with time.

Roberto

September 7, 2014

Ok, now I understood.
Thank you very much for the explanatinon :)
I would like to be in the advanced course very much , but since I am from Brazil, maybe it will be impossible due to the difference of time (12h) :(

Dan

September 7, 2014

Another Question!

How do you handle news events. I noticed that you talked quite a bit about it during this webinar which I greatly appriciated but what I’m wondering is:

How do you handle news? Could you do a webinar/Video about your strategy and news?

I’m talking about what kind of news you regard as important and which news one usually can ignore. Personally I’m still unsure how to interpret the economic calender at ForexFactory.com so I just stay away from pairs that have news coming out that day. However, as you said in this video; if you are too cautious you will miss a lot of good trades.

I’d greatly appriciate a webinar/video about this!

Thanks for you time and effort!

Nick

September 7, 2014

Generally speaking, I do not concern myself with news. I find that if you worry too much about news, you will miss too many trades. Since I trade larger time frames, news usually has no significant impact.

However, there are a few precautions I take. For example, if I see a set-up and a high impact news release is scheduled within one hour, I might wait till after the news to enter the trade.

What do I consider high impact?

A release with the red icon on Forex Factory.

What about relevancy of the news?

Well… this is harder.

If I am trading a AUD pair for example. I would consider AUD, NZD, CNY, and USD news as relevant to that pair. USD news is relevant to every pair. NZD and CNY news usually impact AUD.

If I am trading a GBP pair I would consider GBP, EUR, and USD as relevant.

If I am trading a USD pair, I would only really consider USD relevant.

If I am trading a NZD pair I would consider NZD and AUD news as relevant.

As you see, there is a lot to this. I just picked it all up as I went along. I am not sure if I can do an entire webinar on this. I could possibly do a blog post on it at some point though.

Alfredo Muñoz

September 7, 2014

Nick. I really appreciate for answer so soon, now is clear to me. I’m eager for the next webinar !

maheswar81

September 8, 2014

Hi Nick,

Can you share your support and resistance levels for major pairs please or share the link which you regularly update please.

Thanks
Mahesh

Nick

September 8, 2014

I will share that soon. need to update them first.

alun jones

September 8, 2014

Hi Nick,
You may remember me from a while back, I have left this alone for 2 years or so but watched your video yesterday. Pleased to see that you are still around and its working out still. Seems that your method has stood the test of time and I do like the way it automatically adapts to current conditions.
So gave it a go yesterday plotting S/R lines and fancied Eur/Jpy Long this morning on 8hr T/F, not a perfect entry but trade was +35 and +70 from 136.05 after 0800 candle on Alpari, picture perfect trade after a little pullback to both targets
Anyway, point is it would be ironical if I came around a 5 year cycle back to where I started and I cracked it at last. Would take up the course but if I do not know S/R and price action by now then there is no hope!
Wouldnt mind participating on the forums but see the public one has since gone which is a shame.
Anyway, will give this a serious trial, I think now that I am so laid back and cannot stand watching charts all day, things should be a lot better.
Cyprustrader.

James

September 15, 2014

Hey Nic,

I’m very new at trading, so I have a few questions.

1) how many signals should I anticipate using only daily chart with only two currencies (Eur/Usd and Aud/Usd)…at the moment just going back in time a few months, I’m having a lot of trouble seeing more than a few trades.
2) should I be looking for more indecision than just a spinning top, a doji, or a hammer.
3) for the Eur/Gbp long trade above, before that, there seems to be another trade setup. Was it not valid to take a short at the first bullish doji/small spinning top that appears in the resistance?(even though it probably would have been stopped out, in which case would it have been correct to get back in at the next doji?)

Sorry for all of the questions! I hope you’ll help :)

dkallin

September 23, 2014

Great answer, and maybe you can’t do a webinar but anything that helps us noobies with how to tackle news is something I think would be appriciated!

Pierre

September 30, 2014

Hey Nick,

What risk would you recommend for a beginner? Something around 2%?

Thanks for answer and your videos.

lexikovs

October 2, 2014

Hello Nick. I like your lessons. I have question about pips and stop loss.

Suppose market is down-trended, I made a short position on 4 hour chart. I made stop loss for 40 pips.
However, price before going down, the price candle moves up and down. It can move for 40-50 pips up and down just in few minutes sometimes. And it always touches my stop loss. Anyway it goes in direction which I predicted.

What can be problem here. My forex brokers has a 5 digits after point in the price.

Reza

October 8, 2014

Hi Nick,

Yes I’m struggling in forex.
My difficulties in forex is to spot the key support or resistance.
And therefore, it is difficult for me to decide the entry point, and especially the target profit

And also to spot the candle for the Price Action Opportunity, especially, when the market is only trending in one direction….

Thank you Nick for your time.

Regards,
Reza