Things about FX Trading Execution When Volatility Rises

The FX market had been more active this year, as most of the other asset classes, mainly due to the COVID-19 pandemic, but since we’ve had several years of calm markets, some traders had forgotten how it is to trade when dealing with wild price swings. To bring more awareness, we would like to talk about some of the issues that might encounter in such cases.

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# Partial order execution

Some of the popular FX brokers allow their customers to activate partial order execution. With this feature, they will be able to enter the market when liquidity is thin. Although this might apply only for large orders, in case you hold a larger trading account, you should not get frustrated in case the broker is unable to fill an order in full. Sometimes it will happen, even though you’ve placed a pending order around a key support/resistance area.

# Failure to open a trade

You think the market is about to move impulsively in one direction and because of that you are placing a buy/sell stop order. The price does what’s expected, but the volatility is so high, it literally smashes through your level and the order never gets filled. Alongside managing losses, traders also need to learn how to deal with these situations. There will be a lot of missed opportunities. The key is to leverage to the maximum the ones spotted.

# Worse pricing

This situation applies for market orders. More often than not, especially if your broker is not a market market, you will notice a slight different in the opening price, even though at the time you’ve clicked the buy/sell button you saw something. Due to a small delay and increased volatility, the liquidity provider will process the trade, but at a worse price. It’s important to take into account because the stop loss will get wider and thus the exposure, if the market moves against you.

# Wider spreads

If the broker has floating spreads, higher trading costs when volatility spikes are normal. In case you’ve missed the entry when spreads were normal, the best thing to do is to wait until the market calms down. There’s no point in paying higher spreads and at the same time limit the size of the stop loss. Even though the markets will continue to be risk on or a flight to safety will occur, other trading opportunities will arise and you will be in a much better position to deal with them.

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