Impact of Market Volatility on Futures

Impact of Market
Volatility on Futures
Keep yourself prepared for the highly volatile
markets.

Overview
Traders stay in the game for the long haul due to the risk management
techniques. It is the ability to control and manage losses and stay above water
breathing in the speculative markets. However, risk management becomes more
important for traders in times of increased market volatility while navigating
uncertainty.
High volatility can create immense opportunities in the futures market. So,
traders should also know that it can create high risk-situations. So, besides
ninjatrader automated trading strategies, it is essential to build up strategies for
risk management when market volatility spikes. Also, be careful of how it affects
the futures market.

What Happens When Volatility Spikes?
Quick Price Swings
Technical Issues
Delays in Market
Thin Liquidity
Lock Limits

Quick Price Swings
Market volatility is identified by the rapid turnaround in prices
either way. With the increase in volatility, the potential risk of
loss also increases. Therefore, even though it offers profit
opportunities, risk-averse or inexperienced traders should
avoid trading during extreme volatility conditions.

Technical Issues
Internet traffic and high order volumes can
also extend the financial system to capacity,
causing technical difficulties in online trading.
In short, the technology that has brought
forward historical trading volumes can also
fail sometimes.

Delays in Market
Sometimes the volatile market brings high
trading volumes, which cause a delay in the
execution of orders. Besides, it can fill at
considerably different prices than the original
price, which is referred to as slippage.
Though electronic trading has improved the
transaction speed, even these can become
clogged with the surge in volume.

Thin Liquidity
The thinly traded markets with low liquidity observe volatility with a high
price. To stay away from volatile market scenarios, traders should avoid
thinly traded markets. Instead, traders look for markets for trading with high
liquidity as it is more flexible to enter and exit for short and long positions.
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Lock Limits
Forecast Potential Volatility
When the price fluctuates from a
closing price of the previous day, it
results in futures lock limits. It is one of
the uncommon but critical outcomes
of high volatility. If there is a breach in
certain thresholds, then lock limits
result in trading halts to reduce market
volatility. They are known as circuit
breakers when they are used in stock
markets.
The economic releases can be the
forerunner for market volatility. It is
impossible to forecast surprise news
events. But, you can keep an eye on the
economic reports that offer a unique
understanding of market dynamics. The
scheduled reports can turn the quiet
markets into cheerful in just seconds
depending on the released information.
You can follow the futures economic
calendar to keep up with the daily
financial events. With it, you can stay
current on futures roll dates, first notices,
contract expiration, and last trade dates,
along with other important dates.

Keep yourself prepared for the highly
volatile markets. Take help from
ninjatrader trading strategies and another
algorithm that will keep you informed.