FX Strategies for Volatile Markets

By: Kathy Lien

CD08S.033.042611
Disclaimer
IMPORTANT NOTE: When trading Spot Forex, CFDs, or spread bets you can lose more than your initial deposit.
Trading of foreign exchange contracts, contracts for differences, derivatives and other investment products which are
leveraged, can carry a high level of risk, and may not be suitable for all investors. Past results are not necessarily
indicative of future results. For Australia, a PDS is available at www.gft.com.au. Please read before making any decision
to deal in GFT products. GFT is the issuer of these products. The contents hereof is available or accessible for
informational purposes only and is not to be regarded as an offer or a solicitation to deal in any investment product or to
enter into any legal relations. Each investment product is offered only to and from jurisdictions where solicitation and
sale are lawful.

The information provided should not be relied on as a substitute for extensive independent research, and all trades
should be considered taking into account your personal trading strategy, including risk tolerance before any trades are
placed. Any projections or views of the market provided by this presenter may not prove to be accurate and may not be
representative of GFT, its owners, officers, agents or other employees. GFT will not be responsible for any losses
incurred on investments made by clients as a result of any information contained in this presentation. GFT and the
currency research team do not render investment, legal, accounting, tax, or other professional advice. If such is required,
the services of a competent professional should be sought. This presentation and its contents are the property of GFT.
Any commercial use or distribution of this presentation without the express written consent of GFT is strictly prohibited.

GFT refers to Global Futures & Forex, Ltd. and all of its divisions, branches and subsidiaries, including Global Forex
Trading, GFT Futures, FX360, GFT Global Markets Asia Pte. Ltd. (Unique Entity Number 200717665N), GFT Global
Markets UK Limited regulated by the FSA, GFT Australia (ABRN 103 508 461, AFS License 226625), and GFT DMCC,
Registered & Licensed as a FREEZONE Company under the Rules and Regulations of DMCCA, License Number
DMCC-31136. © 2011 Global Futures & Forex, Ltd. All rights reserved.
Agenda

Q1: Why has the market become more

volatile?

Q2: What can you do about it?

 Trading 101

Basics of Trading

1.  Buy low, sell high

2.  Practice good risk/reward - 2:1 ideal
3.  Avoid getting in or out of the market too often

Source: http://www.clipartof.com/gallery/clipart/blackboard.html
 Trading 101

For Currency Trading:

1.  Buy low, sell high

2.  Practice good risk/reward - 2:1 ideal
3.  Avoid getting in or out of the market too often

Source: http://www.clipartof.com/gallery/clipart/blackboard.html
Why?
Leverage
USD/JPY (each pip is worth approx $1.2) at 84

Cash on Cash
Required Margin = $10,000
100 pips move = +/- $120 (+/- 1.2%)

2x Leverage
Required Margin = $5,000
100 pips move = +/- $120 (+/- 2.4%)

20x Leverage
Required Margin = $500
100 pips move = +/- $120 (+/- 24%)

50x Leverage
Required Margin = $200
100 pips move = +/- $120 (+/- 60%)
Trading 101
Currency trading can be more volatile
Each small move is incrementally larger in FX
1.  Buy low, sell high
Can stop you out before it rebounds

2. Practice good risk/reward - 2:1 ideal

May not achieve the 2:1 risk/reward

3. Avoid getting in or out of the market too often

One of the few ways to turn volatility into
opportunity
Volatile Markets

The old ways of trading don’t always work

Source: http://westhamclaretinmyblood.blogspot.com/2011/04/ak-47s-mcdonalds-and-entitlement.html
VIX

Source: Bloomberg
Who Gets Killed?

Traders that do not use stops!

Source: http://www.clipartguide.com/_pages/0511-0701-3116-2737.html
 Big Moves in Equities

Source:
DealBook®
360
 Commodities – Limit Up

Source: Bloomberg
 Big Moves in Currencies

Source:
DealBook®
360
 Big Moves in Currencies

Source:
DealBook®
360
 Big Moves in Currencies

Source:
DealBook®
360
 Big Moves in Currencies

Source:
DealBook®
360
Dollar Index

Source: Bloomberg
What Caused this Volatility?
Joint intervention in the Yen
March 2010 earthquake in Japan & nuclear crisis
2 Major earthquakes in New Zealand
Middle East unrest
Floods and cyclones in Australia
European Sovereign Debt Crisis
2010 Flash Crash
2010 BP oil spill
2010 Russian heat wave (56k Deaths)
2010 Haiti earthquake

We can’t predict natural disasters, but these events are occurring far
more regularly than anyone would like

Source: http://itstrategyblog.com/business-strategy-and-black-swan-events/
Outstanding Risks
1. Japan is the world’s 3rd largest economy

2. Food and energy prices affect consumers around the world

3. Central Bank monetary policies

4. Sovereign Debt Crisis – Exposure of banks/EU Stress Tests

5. Who will buy U.S. debt once QE2 is over?

6. Fiscal Austerity Programs (including U.S.)

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation
does not constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully
with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided
by the author may not prove to be accurate.
How Volatility Affects You

1. Fast /unexplained moves

2. Overnight volatility
3. Exaggerated trends
4. Highly correlated positions
How Volatility Affects You?
Consequences

Source: http://www.portalhunt.com/site/confusion-a-defining-moment-

http://www.draindoctor.org/drain_cleaning/drain_guide.html
 What can you do about it?
What can you do about it?

5 Suggestions….

http://www.clker.com/clipart-10842.html
What can you do about it?

Stay with
the trend

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This
presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be
considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or
views of the market provided by the author may not prove to be accurate.
 What can you do about it?

Source:
DealBook®
360
What can you do about it?
Use Kathy’s Double Bollinger Bands
to determine trend

Settings
20 Period, 2 Standard Deviation
20 Period, 1 Standard Deviation

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This
presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be
considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views
of the market provided by the author may not prove to be accurate.
 What can you do about it?

Source:
DealBook®
360
 What can you do about it?

Source:
DealBook®
360
 What can you do about it?

Source:
DealBook®
360
MT4

Source:  Autochar-st™  
MT4
What can you do about it?

Trade
short-term

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This
presentation does not constitute a recommendation to follow a particular trading strategy. All trades should
be considered carefully with your personal trading strategy, including risk tolerance. In addition, any
projections or views of the market provided by the author may not prove to be accurate.
What can you do about it?

Trade short-term

1.  Event driven

2.  Price driven
3.  Time driven

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This
presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be
considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views
of the market provided by the author may not prove to be accurate.
What can you do about it?

Event Driven ST Trading

=
Trading News

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This
presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be
considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or
views of the market provided by the author may not prove to be accurate.
What can you do about it?

Event Driven ST Trading

April 12th
4:30 NY / SG -- 8:30 GMT

UK Consumer Prices (March)

 What can you do about it?

Source:
DealBook®
360
Event Driven Trading

3 Guidelines

1) Wait 5 minutes to take the trade

2) 20 – 25 Pip stop
3) 20 - 25 Pip target

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees.
This presentation does not constitute a recommendation to follow a particular trading strategy. All
trades should be considered carefully with your personal trading strategy, including risk tolerance. In
addition, any projections or views of the market provided by the author may not prove to be accurate.
 What can you do about it?

Source:
DealBook®
360

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not
constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal
trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to
be accurate.
What can you do about it?

Event Driven ST Trading

April 12th
9:00 NY / SG -- 13:30 GMT

Bank of Canada rate announcement

 What Can You Do About it?

Source:
DealBook®
360

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute
a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy,
including risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.
What Can You Do About it?

Event Driven ST Trading

April 13th
8:30 NY / SG -- 12:30 GMT

U.S. Retail Sales (March)

 What can you do about it?

Source:
DealBook®
360

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not
constitute a recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal
trading strategy, including risk tolerance. In addition, any projections or views of the market provided by the author may not prove
to be accurate.
What can you do about it?

Price driven trading

=
Capitalising on trader psychology

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This
presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be
considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or
views of the market provided by the author may not prove to be accurate.
 .00 Long
Price Driven ST Trading

Targeting round numbers

Running for the

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a
recommendation to follow a particular trading strategy. All trades should be considered carefully with your personal trading strategy, including
risk tolerance. In addition, any projections or views of the market provided by the author may not prove to be accurate.
 .00 Long
Price Driven ST Trading

Rule # 1

For long trade:

If currency makes a move through

80 level, go long targeting the
round number.

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular
trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided
by the author may not prove to be accurate.
 .00 Long
Price Driven ST Trading

Rule # 2

For long trade:

Take half the trade off at 00 level

and trail the rest by 20 points.

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular
trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided
by the author may not prove to be accurate.
 .00 Long
Price Driven ST Trading
Source:
DealBook®
360

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular
trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided
by the author may not prove to be accurate.
 .00 Long
Price Driven ST Trading

Source:
DealBook®
360

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular
trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided
by the author may not prove to be accurate.
 .00 Short
Price Driven ST Trading

Source:
DealBook®
360

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular
trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided
by the author may not prove to be accurate.
 FailedDriven
Price 00 Long
ST Trading

Source:
DealBook®
360

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This presentation does not constitute a recommendation to follow a particular
trading strategy. All trades should be considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views of the market provided
by the author may not prove to be accurate.
What can you do about it?

Price driven trading

&
Time driven trading

Exclusive customer-only session on

Tuesday 10 May
Inquire at GFT Booth
Strategies
More Strategies!
Forex Workshop on Tues
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Session Breakout
X-Treme Fade
CCI – Do the Right Thing
Value Hunter
00 Scalp!
Inside Day
Trading on Fundamentals
What can you do about it?

Avoid range trading

Trade breakouts

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees.
This presentation does not constitute a recommendation to follow a particular trading strategy. All
trades should be considered carefully with your personal trading strategy, including risk tolerance. In
addition, any projections or views of the market provided by the author may not prove to be accurate.
 What can you do about it?

Source:
DealBook®
360
 What can you do about it?

Source:
DealBook®
360
What can you do about it?

Diversify –
Understand when
your positions are
correlated
The views of the author are not necessarily those of GFT, its owners, officers, agents or
employees. This presentation does not constitute a recommendation to follow a particular trading
strategy. All trades should be considered carefully with your personal trading strategy, including
risk tolerance. In addition, any projections or views of the market provided by the author may not
prove to be accurate.
Diversify

Source: Bloomberg
Diversify

Source: Bloomberg
 Diversify

Source:
DealBook®
360
 Diversify

Source:
DealBook®
360
What can you do about it?

Manage your stops

& limits better

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This
presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be
considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections
or views of the market provided by the author may not prove to be accurate.
Manage Your Stops

1.  Widen stops to accommodate

for increased volatility
AND
Take smaller positions

The views of the author are not necessarily those of GFT, its owners, officers, agents or
employees. This presentation does not constitute a recommendation to follow a particular trading
strategy. All trades should be considered carefully with your personal trading strategy, including risk
tolerance. In addition, any projections or views of the market provided by the author may not prove
to be accurate.
 Manage Your Stops

Source:
DealBook®
360
Manage Your Stops

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This
presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be
considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or views
of the market provided by the author may not prove to be accurate.
Manage Your Stops

2. Trade short-term
AND
Use tighter stops

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees.
This presentation does not constitute a recommendation to follow a particular trading strategy. All
trades should be considered carefully with your personal trading strategy, including risk tolerance. In
addition, any projections or views of the market provided by the author may not prove to be accurate.
Manage Your Stops
Manage Your Stops

The views of the author are not necessarily those of GFT, its owners, officers, agents or employees. This
presentation does not constitute a recommendation to follow a particular trading strategy. All trades should be
considered carefully with your personal trading strategy, including risk tolerance. In addition, any projections or
views of the market provided by the author may not prove to be accurate.
Questions
Free
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for a Forex Master Class

Fast and Furious Trading

Vs.
Slow and Steady Investing

10 May 2011, 6-9 p.m.

DBS Auditorium
Join GFT

Open an account with GFT and get:

-An invitation to Kathy’s exclusive customer-only seminar
taking place on 10 May*
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101: GFT’s Guide to Trading the Forex Market*
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Visit the GFT booth to get started.
*Terms and conditions apply.
Disclaimer
IMPORTANT NOTE: When trading Spot Forex, CFDs, or spread bets you can lose more than your initial deposit.
Trading of foreign exchange contracts, contracts for differences, derivatives and other investment products which are
leveraged, can carry a high level of risk, and may not be suitable for all investors. Past results are not necessarily
indicative of future results. For Australia, a PDS is available at www.gft.com.au. Please read before making any decision
to deal in GFT products. GFT is the issuer of these products. The contents hereof is available or accessible for
informational purposes only and is not to be regarded as an offer or a solicitation to deal in any investment product or to
enter into any legal relations. Each investment product is offered only to and from jurisdictions where solicitation and
sale are lawful.

The information provided should not be relied on as a substitute for extensive independent research, and all trades
should be considered taking into account your personal trading strategy, including risk tolerance before any trades are
placed. Any projections or views of the market provided by this presenter may not prove to be accurate and may not be
representative of GFT, its owners, officers, agents or other employees. GFT will not be responsible for any losses
incurred on investments made by clients as a result of any information contained in this presentation. GFT and the
currency research team do not render investment, legal, accounting, tax, or other professional advice. If such is required,
the services of a competent professional should be sought. This presentation and its contents are the property of GFT.
Any commercial use or distribution of this presentation without the express written consent of GFT is strictly prohibited.

GFT refers to Global Futures & Forex, Ltd. and all of its divisions, branches and subsidiaries, including Global Forex
Trading, GFT Futures, FX360, GFT Global Markets Asia Pte. Ltd. (Unique Entity Number 200717665N), GFT Global
Markets UK Limited regulated by the FSA, GFT Australia (ABRN 103 508 461, AFS License 226625), and GFT DMCC,
Registered & Licensed as a FREEZONE Company under the Rules and Regulations of DMCCA, License Number
DMCC-31136. © 2011 Global Futures & Forex, Ltd. All rights reserved.