Tell me, is 5 pips on one currency pair a lot or a little? It may seem to someone that a strategy with such a return on a single transaction is uninteresting and not worth the time spent. But the question is how often these deals are opened. The strategy presented below is based on the Forex Change of Volaility indicator. Let it not be attributed to the scalpers, but also to the long-term ones. It allows you to make money on market inertia at the time of a surge in volatility.

Forex Volatility Indicator

In Change of Volaility, one way to measure volatility is implemented, based on calculating the standard deviation of price increments over a fixed period of time. It allows you to compare and correlate volatility in the short-term (for example, 1-5 days) and long-term (for example, 100 days) periods. The standard deviation is not taken into account from the difference in closing prices, but from the ratio of the value of the asset at the time of closing of the current day to the value at the time of closing of the previous day. The indicator was first introduced to the society of traders in November 2007.

In the presented strategy, the Forex Volatility Index helps to catch candle impulses that, under the influence of a sharp surge, will be very different from previous periods. The RSI oscillator will also be used as a confirmation indicator, which will show the direction of the signal. The advantage of Change of Volaility – with this indicator you can earn almost any currency pair. The more bursts (in this plan wins EUR / USD), the more open deals.

Trading Terms:

  • timeframe – M5;
  • asset – EUR / USD, GBP / USD, USD / CHF;
  • Forex Volatility Indicator Settings (Short = 6, Long = 100);
  • RSI settings: period = 20, apply to Close, levels (30, 50, 70).

Conditions for opening a long position:

  • trading time – 08.00-10.00 EET. At the beginning of the session, there are especially many bursts with a base. At another time on a short timeframe, you can catch price noise (false motions that confuse the indicator);
  • we look for a column at this time interval on the Change of Volaility indicator, which is very different in size, that is, large compared to the previous ones;
  • RSI is above level 50.

Signal enhancement will be a large candle body during this period. On the next candle we open a position, insuring it with a stop of 7-10 points. Target profit – 5 points.

Conditions for opening a short position:

  • trading time – 08.00-10.00 EET;
  • we look for a column at this time interval on the Change of Volaility indicator, which is very different in size, that is, large compared to the previous ones;
  • RSI is below level 50.

The task of the trader is to catch the moment when the signal candle and indicator data will be especially different. As practice shows, there are false signals, because the rule “Not sure – do not open a deal” is applicable here. The principle of strategy is based on inertia after a pulse. And if the momentum was great, then the deal would be profitable. On other currency pairs, the Forex volatility indicator is also applicable, but you need to adjust the trading time. For the yen, the Asian session can be successful. At the time of the news release, it is better not to trade because of the possible lag in the indicator and the rapid market volatility. In any case, before running on a real account, first select a successful pair and time on a demo account. Good luck with your trading!

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