When talking about markets that are highly volatile and highly unstable, the first market that normally comes to mind, at least in the minds of most, is the currency market. Undoubtedly, when trading with currencies you are likely to end up in the middle of a highly volatile market( given that a currency’s value is impacted by many factors, which includes, though not limited by, natural disasters, political changes, etc. ).

There is no secret that the movements and instability of forex trading is what allows fora Trader to make a profit, but this also makes for a more risky market. As you surely know, greater risks can quickly develop into elevated losses. When engaging in forex, a Forex trader will try to offset risks, and for the most part, a knowledgeable and skilled trader will succeed in reducing risk. However, there can be times that no matter what a Trader does; he or she will end up having to put up with losses. Often times it is a result of mistakes made when making decisions, but other times it is a matter of just chance (and misfortune at that ).

Considering the fact that trades are seldom completed instantly, there's a time frame( between the time when you enter the order and the time when it is completed) where the currency’s value can suddenly change; these sudden changes can generate profits, but they also can generate losses for any Trader. As an example, visualize that you've put a stop- loss order so that you can mitigate losses in a currency trade. Now, it comes the time when the currency you are trading starts to plummet; the currency reaches the stop- loss level and the system automatically issues an order to stop and exit the trade. Nevertheless, through the few seconds that the order takes to be processed, the currency’s value continues to fall; by the time the transaction is finally processed your loss have increased as a result of these few seconds. This issue that occurs provided the impossibility of orders to be processed immediately is slippage, and it must be clear right now that it could be potentially devastating for any Trader. Yes, it's true that slippage can also work out to a Forex news trader’s advantage, but in general it's a problem that has unwanted effects.

In the Forex market slippage is oftena risk that traders will have to put up with, especially at times when the forex market is volatile or unstable. As well, it is important that you understand that a Forex broker will usually try to use slippage to his or her own advantage, even if this means producing losses to you. Keep In Mind, that you're trading in a Forex broker’s platform program, so they might easily work the market’s volatility for their benefit and use slippage as a method of making profits at your expense.

Despite of this, traders normally accept the occurrence of slippage, and in most cases, they are prepared to risk it. Notwithstanding the risk of slippage, the potential profits are far too great to be ignored, therefore traders will continue on trading, even when volatility is high.

 


Comments

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