When someone hears the words “currency volatility”, there usually aren’t any positive thoughts or reactions that are connected to them. But this the term volatility simply just refers to the changes that happen with the value of currency or the Forex market. Currencies are called volatile when they suddenly take on a significant change in value that is more than any other currency in the market.
Volatile is different than risk
A currency’s volatility also does not mean that there isn’t a chance for you to take advantage of the current situation when trading. It also doesn’t mean that you stand the risk of losing all the money you have earned simply because a certain currency your trading with has taken a sudden dive in value.
Like all forms of trading, the Forex market can lead you into a rollercoaster ride of fluctuations of currency value. It is only a matter of strapping yourself tight to your seat and avoid being swept away by your emotions when something unexpected happens to a payment transaction. You should be able to weigh out the risks involved with the current volatility against your overall trading strategy. If you plan ahead and come up with a game plan for these sudden value changes, there is no reason why you should end up with a loss.
Remember the rules of supply and demand
When there is an influx of something in the market, in this case, a certain currency, then the value of the currency only gets lower since there are fewer people wanting to buy them. More supply brings on less demand. So if you find yourself in a market where the currency your holding is getting priced lower and lower, you should avoid jumping the gun like everybody else to sell it at a loss.
Another rule to remember is that what comes up, must inevitably come down. This same principle is true the other way around. This means that although the price of the currency you have isn’t worth much at the moment, it won’t always stay that way and is unlikely to go anywhere else but up in the future. Unless the country the currency is from falls into a state of war and chaos unexpectedly, there is a big chance that you will be holding on to something that can be worth more than it originally had when you bought the currency.
Stick to your strategy or accept less
While more and more Forex traders will go ahead and sell their low volatile currencies at a disadvantage, you should decide if you can stick to your strategy as the market changes, or you’ll follow the lead of everyone else and cut your losses right away.
Most of the currency volatility that happens rarely stick out further than the short-term. Your main advantage to this is that you simply just have to monitor the market and play the waiting game. As long as you follow your strategy and hold tight, you will soon reap the rewards of going against the flow. You may also choose to use a secure payment system that enables you to make local bank transfers in over 50 countries and in over 20 different currencies, so you don’t have to go to the trouble of exchanging currencies.