Impact of Market Volatility on Futures

1
Impact of Market Volatility on Futures

• Keep yourself prepared for the highly volatile
  markets.

2
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.

3
What Happens When Volatility Spikes?
Quick Price Swings
Technical Issues
Delays in Market
Thin Liquidity
Lock Limits
4
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.

5
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.

6
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.

7
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.

8
Lock Limits
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.
Forecast Potential Volatility

• 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.

9
Keep yourself prepared for the highly volatile
markets. Take help from ninjatrader trading
strategies and another algorithm that will keep
you informed.