Trading strategies
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Volatility doesn't discriminate. But it can punish the unprepared.
Stops getting hit on moves that reverse within minutes. Premiums on short-dated options climbing. And the yen no longer behaving as the reliable hedge it once was.
For traders across Asia, navigating this environment means asking harder questions about risk, timing, and the assumptions baked into strategies built for calmer markets.
1. How do I trade VIX CFDs during a geopolitical shock?
The CBOE Volatility Index (VIX) measures the market’s expectation of 30-day implied volatility on the S&P 500. It is often called the “fear gauge.” During geopolitical shocks such as the current Iran escalations, sanctions announcements, and surprise central bank actions, the VIX can spike sharply and quickly.
What makes VIX CFDs different in a shock
VIX itself is not directly tradeable. VIX CFDs are typically priced off VIX futures, which means they carry contango drag in normal conditions.
During a geopolitical shock, several things can happen at once
- Spot VIX may spike immediately while near-term futures lag, creating a disconnect.
- Spreads on VIX CFDs can widen significantly as liquidity thins.
- Margin requirements may change intraday as broker risk models adjust.
- VIX tends to mean-revert after spikes, so timing and duration are critical.
What this means for Asian-hours traders
Asian market hours mean many geopolitical events can break while local traders are active or just starting their session.
A shock that hits during Tokyo hours may already be priced into VIX futures before Sydney opens.
Some traders use VIX CFD positions as a short-term hedge against equity portfolios rather than a directional trade. Others trade the reversion (the move back toward historical averages once the initial spike fades). Both approaches carry distinct risks, and neither guarantees a specific outcome.
2. Why are my 0DTE options premiums so expensive right now?
Zero days-to-expiry (0DTE) options expire on the same day they are traded. They have become one of the fastest-growing segments of the options market, now representing more than 57% of daily S&P 500 options volume according to Cboe global markets data.
For Asian-based participants accessing US options markets, elevated premiums during volatile periods can feel like mispricing, but usually reflects structural pricing factors.
Why premiums spike
Options pricing is driven by intrinsic value and time value. For 0DTE options, there is almost no time value left, which might suggest they should be cheap but the implied volatility component compensates for that.
When uncertainty increases, sellers may demand greater compensation for the risk of sharp intraday moves.
This can be reflected in
- Higher implied volatility inputs.
- Wider bid-ask spreads.
- Faster adjustments in delta and gamma hedging.
In higher-VIX environments, hedging flows can contribute to short-term feedback loops in the underlying index. This can amplify price swings, particularly around key levels.
What this means for Asian-hours traders
Many 0DTE options contracts see their most active pricing and hedging flows during US trading hours. Entering positions during the Asian session may mean facing stale pricing or wider spreads.
If you are seeing expensive premiums, it may reflect the market accurately pricing the risk of a large same-day move. Whether that premium is worth paying depends on your view of the likely intraday range and your risk tolerance, not on the absolute dollar figure alone.
3. How do I adjust my algorithmic trading bot for a high-VIX environment?
Many algorithmic trading systems are built on parameters calibrated during lower-volatility regimes. When VIX spikes, those parameters can become outdated quickly.
The regime mismatch problem
Most trading algorithms use historical data to set position sizes, stop distances, and entry thresholds. That data reflects the conditions during which the system was tested. If VIX moves from 15 to 35, the statistical assumptions underpinning those settings may no longer hold.
Common failure modes in high-VIX environments include
- Stops triggered repeatedly by noise before the intended directional move occurs.
- Position sizing based on fixed-dollar risk, which becomes relatively small compared to actual intraday ranges.
- Correlation assumptions between assets breaking down.
- Slippage on execution that erodes edge.
Approaches some algorithmic traders consider
Rather than running a single fixed set of parameters, some systems incorporate a volatility regime filter. This is a real-time check on VIX or ATR that triggers a switch to different settings when conditions shift.
Approach adjustments that some traders review in high-VIX environments
- Widen stop distances proportionally to ATR to reduce noise-driven exits.
- Reduce position size to maintain constant dollar risk relative to wider expected ranges.
- Add a VIX threshold above which the system pauses or moves to paper trading mode.
- Reduce the number of simultaneous positions, as correlations tend to rise during market stress.
No adjustment eliminates risk. Backtesting new parameters on historical high-VIX periods can provide some indication of likely performance, though past conditions are not a reliable guide to future outcomes.
4. Is the Japanese Yen (JPY) still a reliable safe-haven trade?
During periods of global risk aversion, capital has historically flowed into JPY as investors unwind carry trades and seek lower-volatility holdings. However, the reliability of this dynamic has become more conditional.
Why has the yen historically moved as a safe haven?
Japan’s historically low interest rates made JPY the funding currency of choice for carry trades and when risk-off sentiment hits, those trades unwind quickly, creating demand for yen.
Additionally, Japan’s large net foreign asset position means Japanese investors tend to repatriate capital during crises, further supporting JPY.
What has changed
The Bank of Japan’s shift away from ultra-loose monetary policy in recent years has complicated the traditional safe-haven dynamic.
As Japanese interest rates rise:
- The scale of carry trade positioning may change.
- USD/JPY can become more sensitive to interest rate spreads.
- BoJ communication and domestic inflation data may influence JPY independently of global risk appetite.
The yen can still behave as a safe haven, particularly during sharp equity sell-offs. But it may respond more slowly or inconsistently compared to earlier cycles when the policy divergence between Japan and the rest of the world was more extreme.
What to watch
For traders monitoring JPY as a safe-haven signal, BoJ meeting dates, Japanese CPI releases, and real-time US-Japan rate spread data have become more relevant inputs than they were a few years ago.
5. How do I avoid ‘whipsawing’ on energy CFDs?
Whipsawing describes the experience of entering a trade in one direction, getting stopped out as the price reverses, then watching the price move back in the original direction.
Energy CFDs, particularly crude oil, are especially prone to this in volatile markets. And for traders in Asia, the combination of thin liquidity during local hours and sensitivity to geopolitical headlines can make this particularly challenging.
Why energy CFDs whipsaw
Crude oil is sensitive to a wide range of headline drivers: OPEC+ production decisions, US inventory data, geopolitical supply disruptions, and currency moves.
In high-volatility environments, the market can react strongly to each headline before reversing when the next one arrives.
- Price spikes on a headline, stops are triggered on short positions.
- Traders re-enter long, expecting continuation.
- A second headline or profit-taking reverses the move.
- Long stops are hit. The cycle repeats.
Approaches traders may consider to manage whipsaw risk
Some traders choose to change their risk controls in volatile conditions (for example, reviewing stop placement relative to volatility measures). However these may increase losses; execution and slippage risks can rise sharply in fast markets
Other approaches that some traders review:
- Avoid trading crude oil CFDs in the 30 minutes before and after major scheduled data releases.
- Use a longer timeframe chart to identify the prevailing trend before entering on a shorter timeframe, reducing the chance of trading against larger institutional flows.
- Scale into positions in stages rather than committing full size on initial entry.
- Monitor open interest and volume to distinguish between moves with genuine participation and low-liquidity fakeouts.
Whipsawing cannot be eliminated entirely in volatile energy markets. The goal of risk management in these conditions is not to predict which moves will hold, but to ensure that losses on false moves are smaller than gains when a genuine directional move follows.
Practical considerations for volatile Asian markets
Asian markets carry structural characteristics that interact with volatility differently from US or European markets:
- Thinner liquidity during local hours can exaggerate moves on thin volume, particularly in energy and FX CFDs.
- Events in China, including PMI releases, trade data, and PBOC policy signals, can move regional indices.
- BoJ policy decisions have become a more active driver of JPY and Nikkei volatility in recent years.
- Overnight gaps from US session moves are a persistent structural risk for traders unable to monitor positions around the clock.
- Margin requirements on leveraged products can change at short notice during high-VIX periods.
Frequently asked questions about volatility in Asian markets
What does a high VIX reading mean for Asian equity indices?
VIX measures expected volatility on the S&P 500, but elevated readings typically reflect global risk aversion that flows across markets. Asian indices such as the Nikkei 225, Hang Seng, and ASX 200 can often see increased volatility and negative correlation with sharp VIX spikes.
Can 0DTE options be traded during Asian hours?
Access depends on the platform and the specific instrument. US equity index 0DTE options are most actively priced during US trading hours. Asian traders may face wider spreads and less representative pricing outside those hours.
Are algorithmic trading strategies inherently riskier in high-volatility conditions?
Strategies calibrated during low-volatility periods may perform differently in high-VIX environments. Regular review of parameters against current market conditions is prudent for any systematic approach.
Has the JPY safe-haven trade changed permanently?
The Bank of Japan’s policy normalisation has introduced new dynamics, but JPY has continued to strengthen during some risk-off episodes. It may be more conditional on the nature of the shock and the BoJ’s concurrent posture.
What is the best way to set stops on energy CFDs in high-volatility conditions?
There is no universally best method. Many traders reference ATR to calibrate stop distances to prevailing conditions rather than using fixed levels. This does not guarantee exit at the desired price and does not eliminate whipsaw risk.
The decision to scale (increase the traded lot size of a specific EA) should be based on statistical evidence that indicates your EA has the potential to perform to certain expectations.
Equal weight should be given to the decision to scale, as to the initial decision to deploy an EA. This guide provides an indicative approach on how to put together and action your scaling plan.
Before You Start Your Scaling Plan
Important: this should be an individual plan that is consistent with your personal trading objectives, your EA portfolio, and your personal financial situation (including account size).
We are going to use a starting lot of 0.10 per trade in the examples in this document —you want to adjust this based on your own risk tolerance.
Whatever your chosen lot size start point, EA scaling should be a pre-planned incremental approach, scaling stepwise based on performance metrics you are seeing in your live trading account.
You should also have assessed the current margin usage of your EA portfolio exposure to ensure that any scaling and related increased margin requirements are appropriate to the size of your account.
Suggested Scaling Baseline Requirements
Scaling should only be performed when your EA is performing to what you deem to be a good standard. To make this judgment, you need to set some minimum performance standards.
The past performance of your EA is not a guarantee of future performance. If market conditions change, you must remain vigilant and continue to measure performance on an ongoing basis for every live EA you have.
You need to define the key metrics that are important to you.
Two important metrics to include are:
- The number of trades: to provide some evidence of reliability
- The period of time: to have had exposure to at least some variation in market conditions
Example of how you may lay your metrics out in a table:
Some may choose to include proximity to original expectations of other metrics, such as minimum win rate, average profit in winning trades, and average loss in those that go against you.
It should only be after your metrics are met that lot scaling begins on any specific EA.
Lot Size Scaling Ladder
Below is an example of a performance-based scaling plan assuming a 0.10-lot baseline.
Again, this is indicative. It provides a framework with clear review dates and an approach that illustrates incremental scaling. You must still define a regime that is right for your specific trading objectives.
Risk Guardrails
It is vital to keep an eye on your general account risks and have limits in place that guide your EA use.
Such limits must be constant across all stages of scaling and referenced beyond the risk of a single EA, but to your portfolio as a whole.:
Per-Trade Risk (Nominal)
Trade risk for any one trade should be seen in the context of account size and the dollar risk based on the risk parameters you have set for your EA.
Specify a maximum percentage of the account balance — a $200 loss is more impactful on a $1000 account compared to a $10,000 account.
Stick to what is right for you in terms of your tolerable risk level based on your trading objectives and financial situation. A common suggestion is a 1-2% risk of account equity per trade.
Total Open Exposure
Specifying maximum exposure in the number of EAs open at any time and those that use the same asset class is important for overall portfolio risk management.
There are tools you can use to monitor exposure risk generally, as well as those that can be used to indicate single asset exposure.
Margin Usage
It is always desirable that your set exit approaches and parameter levels are what your exits are based on. It should not be because your margin usage has meant you have moved into a margin call situation.
Specify a minimum level to adhere to and make sure that your account is sufficiently funded. If volatility or slippage rises (e.g., news events or illiquid sessions), reduce lot size temporarily.
Scaling Psychology – Managing “Big Numbers”
As lot sizes rise, your emotions may respond accordingly when you see the larger dollar amounts that your EA is generating.
If you are used to seeing an average profit of $100 and average loss of $50, and suddenly you are seeing significantly bigger numbers, it creates an emotional challenge where you may be tempted to do a “discretionary override”.
Although there are situations, such as major market events, overexposure in a specific asset, or VPS or account system problems, where such intervention may be considered, generally this would distort the actual performance evaluation of your EA and is not encouraged (unless it is pre-planned).
The table below presents some of the generally accepted challenges and offers suggestions on how to manage them.
Your Plan Into Action…
In practical terms, your scaling plan should have two components:
- The key parameters for action on your chosen key metrics
- Specified periodic review times to make your next scaling decision
This is not a race. Having systems in place facilitates creating the opportunity that scaling brings while still mitigating the risks.
There are few trades as appealing, or as risky, as trying to catch a market reversal. The idea of entering at the turning point and riding the new trend is exciting. However, most traders fail to consistently produce good trading outcomes on this potential, often entering too early without confirmation, and thus get caught at a pause point of a continuing powerful move.Trend reversals can indeed offer excellent reward-to-risk potential, but as with any trading approach, only when approached systematically, the confluence of key factors, and timing.
What Is a High-Probability Entry?
Before diving into reversals specifically, let’s define what we mean by a high-probability entry.A high-probability entry is a trade taken in conditions where:
- There is clear evidence from price action and structure
- There is an alignment with the overall market context, such as timing, favourable price levels, and volatility
- Risk can be logically defined and limited to within your tolerable limits
- It may offer a favourable risk-to-reward profile (providing you execute following a pre-defined plan)
This approach should underpin all trading strategy development. And be consistently executed according to your defined rules, which must be constantly reviewed and refined based on trading evidence.
Reversal vs. Retracement: Know the Difference
Many traders confuse a retracement with a reversal, often with potentially costly consequences. It is ok to exit on a retracement and be ready to go again if there is a breach of the previous swing high. But this must be part of your plan, with a strategy for trend continuation in place. However, if your plan suggests that you DON’T want to exit on retracements, then the following table gives some guidance on what potential differences may be. RetracementReversalA temporary move against the trendA complete shift in directional controlPrice often continues in original directionPrice begins trending in the opposite directionHealthy part of a trend’s rhythmMarks the end of a trendTypically shallow, to a Fib/MA/structureOften deep, may break previous swing structureVolume often reduced after swing high if long or swing low if short.Volume often increased after swing high if long or visa versa.
Understanding Trend Exhaustion
Before any reversal occurs, the existing trend must show signs of exhaustion. This is the first phase of a potential turning point — and one of the most overlooked.
How Trend Exhaustion Looks on a Chart:
- Climactic candles – multiple wide-range bars with expanding bodies.
- Failed breakouts – price pushes through a level but fails to hold.
- Reduced momentum – smaller candles, overlapping wicks, indecision bars.
- Volume spikes with no follow-through – smart money distributing or exiting.
- Multiple tests of the same level – a sign that the trend is running out of energy.
The Anatomy of a High-Probability Reversal
A strong reversal setup typically has three key factors that can be supportive of a of follow-through.
1. Location – Price at a Key Zone
- Major support/resistance level honoured
- Prior swing highs or lows at a similar price point
- Higher timeframe structure – I,e, agreement on a 4 hourly chart as well as an hourly.
In simple terms, if the price isn’t at a meaningful location, a meaningful reversal is less likely to occur.
2. Previous Signs of Trend Exhaustion
We have covered this above, with evidence that the current trend has now weakened, and there is some justification to prepare to enter a counter-trend.
3. Structural Confirmation
This is the trading trigger you are looking for as a potential signal for entry. Structural confirmation transforms an idea (“the price might reverse”) into an actual setup (“the reversal is underway”).Look for the following four signs:
- Trendline or key short-term moving average breached
- Lower highs and lower lows in an uptrend or higher lows in a downtrend
- Confirmation that a key swing point has been honoured
- Evidence that a retest and rejection of the broken structure has occurred.
This shows that momentum has not just stalled, it has now shifted.
Context Filters
Reversals are more likely to succeed when conditions are supported by other factors. This is to do with the identification of a strong market context where reversals are more likely to happen. These may include:
- Time of day: The open of London or US sessions, or into session close when there may be some profit taking on a previously strong move
- Volatility extremes: Price has expanded beyond its normal daily range (ATR-based or visually evidenced on a chart)
- Market sentiment: Everyone is already long at the top or short at the bottom — setting up for a squeeze
- Catalysts: Reactions to news, or data, that may cause a significant one-sided move
Adding context could make the difference between a technically correct trade and one that may offer a higher probability of going in your desired direction.
Recognising Common Reversal Patterns
There are classic chart patterns that may help visually reinforce the principles. They reflect exhaustion, rejection, and structural change, and may encourage many traders to follow the move, adding extra momentum to any initial move. PatternSignal TypeKey ClueConfirmation NeededDouble Top/BottomReversal StructureRepeated rejection of key levelBreak of swing low/high between peaksHead & ShouldersMomentum FailureFailed retest after strong pushNeckline breakPin BarExhaustion CandleSharp rejection with long wickOpposite-direction close after the pinEngulfingSudden Power ShiftOne candle overtakes previous rangeFollow-through candleRounding Top/BottomSlow Institutional TurnGradual stalling and reversalNeckline break of curveBreak of Structure (BoS)Structural ConfirmationNew higher low/lower high, support breakRetest and failure to reclaim broken level⚠️ These patterns should not be traded in isolation. Use them with context and only after signs of exhaustion and structure shifts.
FOUR Trader Reversal Traps to Avoid
Even with a solid framework, it’s easy to fall into common traps:
- Trying to pick the exact top or bottom - Wait for price to prove the turn, don’t anticipate and enter early
- Entering against the higher timeframe trend – Zooming out and checking alignment with higher timeframes may be prudent to reduce the likelihood of having to fight momentum on larger timeframes.
- Trading every reversal signal - Not all signals are valid or particularly strong. Look for the confluence of multiple factors covered earlier, not just the presence of a pattern.
- Letting bias override evidence - Just because you want a reversal to happen, it NEVER means it is there unless backed up by evidence.
Don’t Forget the Full Trading Story
A great setup means nothing without excellent execution. These ESSENTIAL facts are critical as with any trade, but there will never be an apology for reinforcing these.
Patience and execution discipline
Wait for your full criteria to be met. Avoid “almost” setups that feel tempting but don’t fully align with your full plan criteria. Likewise, when all your boxes are ticked, then take action.
Exit strategy
Use a mix of targets, structure-based trails, or scaling out, and know in advance how you’ll manage the trade once it starts moving.High-probability entries are only one part of a winning trade. Exit efficiently or you’ll waste great entry setups because of poor execution. There are many traders in this position; make sure you are not one of them.
Summary
High-probability reversals are not about being right at the top or bottom when you enter; this is rarely possible and adds additional risk without confirmation. They are about recognising and being ready when the trend is potentially changing, and taking action when:
- Price is at a key level
- The current trend shows clear signs of exhaustion
- Structure confirms the shift
- And context supports the move
Trade the evidence and your plan, not just what you think is likely to happen. Be patient, be ready, and when the setup is there, execute your trade with confidence.
Crude Oil has always been one of the most popular and highly traded markets for CFD traders whether it is WTI or Brent, especially recently as geopolitical and economic forces have seen its price fluctuate from extreme lows to extreme highs. It’s easy to see why, Oil is a bellwether for the health of the global market, oil greases the wheels of global commerce and with CFDs it’s possible to take a position in this exciting market, whether you think the price will head up or down. In this CFD Oil trading Article we will look at the following: How to use CFDs to trade oil Fundamental forces that drive the price of oil Popular technical strategies for trading oil CFDs How to use CFDs to trade oil CFDs or Contracts For Difference allow you to speculate on the price of oil, without owning the underlying asset.
A spot oil CFD tracks the price of the spot market being the cleanest and most efficient way to speculate on the price of oil. They also allow you to take a position in both directions, you would enter a buy (Long) positions if you believed the price will rise, or a sell (Short) position if you believe the price will fall. With Long positions you are looking to buy and sell at a higher price at a later time to profit on the trade.
With a Short position you are selling with the view to buy back at a later time to profit on the trade. At GO Markets we offer our clients the worlds most popular oil trading platform in Metatrader 4 and 5, another advantage to these CFD trading platforms is the ability to automate oil trading strategies. Other advantages to trading oil CFDs with GO Markets: Trade 23 hours a day on WTI oil, 21 hours a day on Brent oil, unlike an ETF or oil company listed on a stock exchange that is only open while that stock exchange is open.
Leverage – the margin required to open the trade will be a fraction of the face value of the position depending on what leverage you are comfortable with. Flexibility in position sizing starting from 0.1 lot ($0.10 USD per point movement in oil) unlike oil futures which have rigid contract sizes. Rolling contract, no expiries such as in options or futures to worry about.
To Enter a position in Metatrader, you would bring up a deal ticket by clicking “New Order” then select your position size, any Stop Loss or Take Profit levels you want the position to automatically close at and hit Buy or Sell. As with any instrument, make sure you are familiar with the lot sizing. 1 standard lot in oil (USOUSD and UKOUSD) is 100 barrels, or $1 USD a point so make sure you set the volume to a level commensurate to your account size and risk appetite. Now, the next question is how you decide on a buy or sell, let’s look at the fundamentals of what drives oil and some technical analysis you can use to answer this question.
Fundamental forces that drive the price of oil Both WTI oil (USOUSD) and Brent Oil (UKOUSD) are highly correlated and will both be referenced as “oil” in the below. While no one reason can be fully attributed to movements in the price of oil, there are an important few fundamental drivers that will influence the price and whose relationship has been time tested. None of these on their own should be used as a sole reason to enter a position, but having the fundamentals on your side will certainly give you an advantage.
The main fundamental drivers in my experience are The perceived health of the global economy OPEC+ production cuts or increases Geopolitical issues The perceived health of the global economy Oil is the driver of commerce, it is needed for the transport and manufacturing of goods and getting people around. If economic conditions are deteriorating, it means less economic activity and the need for less oil sending the price down. A global economy which is seen as “hot” means more economic activity and more demand for oil, seeing it’s price increase.
A clear chart to see this is the price of oil as compared to the US 10-year bond yield over the years. You can see the price of oil and the yield are highly correlated, this is due to yields going up when the economy is “hot” and yields falling when the economy enters a period of contraction, similar price drivers to oil. The black line is WTI oil price, the orange US 10-year yields going back 10 years.
Source: tradingview.com OPEC+ production cuts or increases The Organization of the Petroleum Exporting Countries (OPEC) is a cartel of leading oil-producing countries formed in order to collectively influence the global oil market. OPEC started with a handful of Middle Eastern oil producers in 1960, and has since grown to 24 members in OPEC+. Even thought the USA is currently the worlds top oil producer, OPEC+ countries as a whole still dominate global oil supply and decisions made by the cartel can have a dramatic influence on the price of crude oil.
Market share of oil producing nations: Source: gisreportsonline.com OPEC+ hold regular meetings during the year, normally the expected result is well telegraphed, but sometimes there can be a surprise, such as at their latest meeting on Sunday April 2 nd, 2023, where a surprise production cut was announced, seeing the price of oil gap significantly higher on Mondays open, showing oil traders to always approach these meetings with caution. Geopolitical issues The last three years has seen some very influential geopolitical events, or “black swans” and oil being closely tied to the health of the global economy has seen some very big moves on the back of these events. The Pandemic and its related lock downs and slowing of global commerce saw the price of oil slump to all time lows, followed by the war in Ukraine which saw oil jump to multi year highs on the fear of supply disruptions (Russia is the second biggest oil producer in the world) The chart below illustrates this: Oil traders especially need to be aware of geopolitical risks as the above chart shows.
Technical strategies for trading oil CFDs While having a good understanding of the fundamentals (in my opinion) is important to help you choose the best trades most traders will use a combination of technical analysis and fundamentals with the aim for higher probability outcomes in their trades. Some traders will use technical analysis exclusively without any interest in the fundamental drivers using things such as RSI oscillators, support and resistance areas and trend lines solely to decide on their trade direction. Which option is best is solely up to the trader, their time frames for the trades and risk appetite, all can work, and all can fail neither option can be seen as “better” than the other, it all depends on the individual trader.
Technical analysis is an art in itself and there is a lot to learn on this subject, I encourage anyone interested to research the many weird and wonderful technical analysis strategies that are documented online. But let’s take a look at a popular technical indicators that oil traders use to make their trades. Support and Resistance Support and resistance are one of the most widely used and accurate (when used correctly) technical indicators that can be used by traders.
Support and Resistance areas are points in the market where the price is held from going lower (Support) or going higher (Resistance), these are areas where buyers or sellers are entering the market as they see value in the asset at that price. These levels can last a long time or be temporary and can be used to predict turn arounds in the market, or a break of these levels could indicate a further push in that direction. Oil is also particularly sensitive to psychological levels around “big figures” or rounded number, e.g. 79.00 and 74.00 As can be seen on the chart below.
Hopefully this article has given you an interest to learn more about trading oil with CFDs. Feel free to contact the GO Markets team if you have any questions on trading oil CFDs and opening an account with us.
The US Dollar Index (DXY) is a popular tool used by forex traders to assess the value of the US dollar relative to a basket of other major currencies. The DXY is calculated using the weighted average of six major currencies: the euro, yen, pound sterling, Canadian dollar, Swedish krona, and Swiss franc. To use the DXY to trade forex, you can follow these steps: 1.
Monitor the DXY: Keep an eye on the movements of the DXY to get a sense of the overall strength or weakness of the US dollar. You can use technical analysis tools, such as moving averages or trend lines, to identify the direction of the trend. 2. Analyse currency pairs Look for forex pairs that are inversely correlated to the DXY.
This means that when the DXY goes up, the currency pair goes down, and vice versa. For example, the EUR/USD pair is negatively correlated to the DXY, which means that as the DXY goes up, the EUR/USD pair goes down. Plan your trades Once you have identified a currency pair that is inversely correlated to the DXY, you can plan your trades accordingly.
For example, if the DXY is showing signs of weakness, you may want to consider going long on a negatively correlated currency pair, such as the EUR/USD. Manage your risk As with any trading strategy, it's important to manage your risk when using the DXY to trade forex. Make sure to use stop-loss orders to limit your losses in case the market moves against you.
Currency pairs may be influenced by other factors besides the DXY, which may not be a perfect indicator of the US dollar's value. To make informed trading decisions, it is important to combine the DXY with other technical and fundamental analysis tools.
Bollinger Bands are one of the most popular indicators that FX and CFD traders use, invented in the 1980’s they are a technical analysis tool that are widely used by short and long term traders. The main uses for Bollinger Bands is determining turning points in the market at oversold and overbought levels and also as a trend following indicator. Like any technical indicator Bollinger Bands should be used with your own analysis to confirm trades and help set entry and exit levels, they are a fairly simple indicator that focuses on price and volatility only and shouldn’t, in my opinion be used in isolation.
While effective, to use them successfully you will need to be aware of the fundamentals and other technical indicators such as major support or resistance levels. How Bollinger Bands are calculated Bollinger Bands are composed of three lines. The middle line is a simple moving average (SMA), the default period being 20.
The upper and lower bands are the SMA plus or minus 2 standard deviations by default, the SMA period and Deviations can be adjusted in the settings of the indicator if desired, but the standard settings are the most popular settings among traders. When the price hits the upper band the market could be seen as “overbought” when it hits the lower band it could be seen as “oversold”, they can also be used as levels where trends are confirmed, e.g. hitting upper band could be seen as the start of a strong uptrend and vice versa. Day Trading strategies using Bollinger Bands Bollinger Bands are used mainly in two different trading styles, for contrarians looking for overbought and oversold levels to enter fade trades, or confirmation of trend for trend following systems. Both systems have their pros and cons, as with most indicators it will depend on the market “fee” for the time used, a choppy whipsawing market will see the fading system work very well, a strong trending market will see the trend following system work very well.
As with any technical system, the selection of the market to trade and being aware of the fundamentals driving the FX market at that time are critical.. Just had a Fed meeting where they surprised with a 100bp rate hike? Don’t use the fade system on USD pairs!
A good technical system I have found is useful is a mixture of both of these strategies, using the Bollinger Bands to confirm a trend, then using the fading strategy to trade pullbacks of this trend. Lets look at the example below from the AUDNZD – 5 minute chart from the 23 rd March 2023 In the above example, which is a common price action across all FX pairs, you would be using the Bolling Bands to confirm a down trend after a close below a major low. Once the possible trend is confirmed, we will be using the “overbought” level of the upper band to enter a short trade, with a take profit exit on 2 closes below the lower band, indicating the market may have gone into “oversold” territory and was time to take some money off the table.
This process would be repeated while lower highs were being made, a close above a major recent high along with a close above the upper Bollinger Band would indicate the trend may have come to an end. This can be seen on the chart below, later in the session on the same pair. At this point you would exit the short selling of the down trend and reverse to a long bias, or if your analysis on fundamentals were negative for this pair, wait for a new downtrend to form for another shorting run.
The Bollinger Squeeze Strategy Another strategy popular with FX traders is known as the Bollinger squeeze strategy. A squeeze occurs when the price has a big move, then consolidates in a tight range, this also sees the Bollinger bands go from wide to “squeeze” in a much narrower range, hence the name of the strategy. A trader would be looking for a breakout and close below or above the Bollinger bands of this squeezed range for a trade entry, see the example below from the EURUSD 5 Minute chart on 23 rd of March 2023 When the price breaks through the upper or lower band after this period of consolidation a buy or a sell signal is generated.
An initial stop is traditionally placed just above (or below in a long position) the range of the consolidation. TP rules could be similar to the previous strategy, i.e. multiple closes below the lower Bollinger Bans in the case of a short, or using the middle Bollinger Band as a trailing stop in the move is explosive and looks to continue. Summary As you can see there are multiple uses for Bollinger Bands in a FX day traders toolbox, including using them for overbought and oversold trade signals in a trending market and the Squeeze strategy where an explosive move often follows a period of consolidation.
There are also many more strategies using this indicator which I encourage you to research for yourself.
军形篇 - The Chapter of Tactical Dispositions Original Text: 善战者，先为不可胜，以待敌之可胜。 Translation: Good commanders first evaluate the possibility of being defeated and then wait for an opportunity to defeat the enemy. Don’t you think this sounds very similar to using a trading stop-loss? The concept of setting up a stop-loss is to estimate and prepare for the worst case scenario.
As a commander, Master Zhu would suggest you treat the money in your account as your soldiers and take care of their lives. Let's say you're on the battlefield and you strategize that a plan of attack might sacrifice 50% of your army, that's 50% of your soldiers' lives (i.e., 50% of your account balance), surely no respected commander would approve that kind of attack. However, in forex trading, some people will quickly lose 50% of their money in a short period.
In Sun Zhu's eyes, this would make for a very unqualified commander. Therefore, placing a stop-loss that could cause you to lose 50% in a single trade is a poor decision. Most experienced traders might suggest a 2%~5% stop is a wiser move.
Even a 10% stop may be considered quite extreme. Would you risk the lives of 10% of your infantry? Some might argue that it depends on the circumstances, either way, the same level of consideration must be given in trading to have any chance of success.
Also, most traders lose 50% of their account or more because they fail to place any stop-loss measures at all. Under the context of the Art Of War, this means you never bothered to estimate the worst scenario before you attacked. In Master Sun’s eyes, that is extremely unacceptable.
Original Text: 不可胜在己，可胜在敌。 Translation: The ability to secure ourselves against defeat lies in our own hands. The opportunity to defeat the enemy is provided by themselves. A very remarkable concept.
Many investors believe they can actively beat the market, which is wrong. The market is far stronger and smarter beast than the average person. Instead of trying to "beat" the market, more time and effort should go into improving yourself.
For example, try focussing on how to better to defend, such as setting up suitable stop-losses as the previous saying suggests. Once you've developed the ability to protect your soldiers, then all you need is to do is wait for an opportune time to attack (you can observe it from chart patterns), then and only then, will you be trading like an intelligent commander, prepared to lose a battle and win the war. Original Text: 故善战者，能为不可胜，不能使敌之必可胜。 Translation: Thus, a good commander can secure himself against defeat but cannot make sure of defeating the enemy.
Master Sun corrects us here on another common misunderstanding. Nowadays many fund managers will brag about their “target profit” to attract your attention. As an individual investor, you might be vulnerable to being misled and start to think “maybe it's good to set a target profit for my investing too?.” Well, Sun Tzu would argue that this is wrong.
If you set a target return for yourself and you are unable to achieve it, you will most likely become hurried and vulnerable. Imagine your basketball team is losing and it's the last few minutes of the game. How many times have we seen teams abandon their defensive tactics, throwing caution to the wind and put everything they have into the final attack?.
Perhaps having Michael Jordan on the court may help, but ultimately, this scenario doesn't end well for those losing teams. With little to no defense in place, the opposing team will typically score more points and much more easily than before making matters worse. The same logic applies to the financial markets.
There is a general tendency to increase your position and attack more at the worst possible time, and the market will more often punish those who fail to defend their position adequately. Original Text: 故曰：胜可知，而不可为。 Translation: Hence the saying: You may know how to win, but sometimes you are not able to do it. Original Text: 见胜不过众人之所知，非善之善者也； Translation: To see victory only when it is within the ken of the common herd is not the acme of excellence.
Original Text: 战胜而天下曰善，非善之善者也。 Translation: Neither is it the acme of excellence if you win and the whole world says, “Well done!” to you. In this paragraph, Sun illustrates another common misunderstanding by the general public. You probably heard of the 20-80 rule, which states that roughly 20% of the population controls 80% of the global wealth.
You may have also heard that 20% of the population will win at trading while the other 80% will lose. When it comes to trading, this theory suggests the most popular idea about price direction will cause you to lose money in the long run. Thus, if your opinion falls within the common herd, then perhaps you need further training as a trader.
Many beginner traders will follow those famous pundits on the major television stations. You know the ones I'm talking about, those who claim they can predict the market direction with 80% accuracy and never fail. If we consider the 20-80 rule above, then this claim starts to sound quite absurd or should at least raise some internal alarm bells.
Most of these analysts have a claim to fame because they successfully predicted one or two big financial events, say the start of the 2008 crisis. Does this mean they can accurately predict every other upcoming event with such accuracy? Of course not, nobody can.
Hence, Sun Zhu said those who won the applause of the whole world might not be as good as you think. Original Text: 故举秋毫不为多力，见日月不为明目，闻雷霆不为聪耳。 Translation: To lift a hair is no sign of immense strength; to see the sun and moon is no sign of sharp sight; to hear the noise of thunder is no sign of a quick ear. Original Text: 古之所谓善战者，胜于易胜者也。 Translation: Thus the ancients said an excellent winner is one who not only wins but excels in winning with ease.
Original Text: 故善战者之胜也，无智名，无勇功， Translation: Hence his victories bring him neither reputation of wisdom nor credit for courage. Original Text: 故其战胜不忒。不忒者，其所措胜，胜已败者也。 Translation: He wins his battles by making no mistakes. Making no mistakes is what establishes the certainty of victory, for it means conquering an enemy that is already defeated.
Here Sun describes for us what kind of person can be known as an “excellence winner.” This person has trading success based on defense. They make minimal mistakes (i.e., choosing the right time, trend and setting up sensible stop-losses) they also understand that some losses are inevitable while protecting their account for future battles. This kind of success is often very low-key.
It's unlikely to receive any applause or stardom because he or she is not looking to parade their wins in public as it's all part of a more important strategy. Original Text: 故善战者，立于不败之地，而不失敌之败也。 Translation: Hence a skillful commander puts himself into a position which makes it impossible for being defeated and does not miss the moment of defeating the enemy. Original Text: 是故胜兵先胜而后求战，败兵先战而后求胜。 Translation: Thus a victorious strategist only seeks battle after the defense is guaranteed, whereas a losing strategist first encounters a fight and then looks for victory.
These two sentences summarized what we had covered today. First, make sure it is impossible to be defeated (by managing your positions and stop-losses well). In essence, this means even though losses are possible, blowing up an account on a single trade is not.
Seek the most opportune time for a battle (Open a position). Don't just go with the crowd. Do your analysis and study wisely.
Once opened, closely monitor the five elements of the markets ( we covered this in part 1 of this series), then you are heading towards victory. By Lanson Chen – Analyst Lanson Chen @LansonChen This article is written by a GO Markets Analyst and is based on their independent analysis. They remain fully responsible for the views expressed as well as any remaining error or omissions.
Trading Forex and Derivatives carries a high level of risk.