Some say volatility is a forex trader’s best friend. But how do you make pips when the market is moving like it is still waiting for its coffee?
When the economic calendar is quiet and traders have priced in the major central banks’ policy outlooks, volatility can dry up. That doesn’t mean nothing is happening. It means you may need to adjust your expectations, become more selective, and stop hunting for moves that are not there.
So how can you trade when there is no obvious catalyst? Here are a few ideas.
Look at currency correlations for possible trade opportunities
A lack of central bank announcements or tier 1 reports doesn’t guarantee a quiet week. Forex prices aren’t driven by central banks and economic data alone.
Gold, iron ore, oil, and dairy prices, for example, can influence the Australian, Canadian, and New Zealand dollars. Government bond yields, equities, and large cross-border transactions can also move major currencies.
Just remember that correlations can change. The Canadian dollar may ignore oil if market risk sentiment is doing most of the driving. Check whether the relationship is visible on your time frame and supported by price action.
Of course, you can’t buy the dollar just because the weather in your brother’s cousin’s neighborhood is remarkably bad. Other traders need to see the same connection you’re seeing
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Try making carry trades
As explained in the School of Pipsology, carry trades try to profit from the interest rate difference between two currencies. You buy a currency with a higher rate and sell one with a lower rate. If the exchange rate stays stable, positive rollover can add to your return.
But carry isn’t free money. The pair can move against you and wipe out weeks of interest in a few hours. Shifting central bank expectations or a burst of risk aversion can also trigger a fast unwind.
Check your broker’s swap rates and spreads because costs and credits vary. Carry setups work best when the broader trend and risk environment support them, not simply because one currency offers a higher rate.
Find strategies for a low volatility environment
Quiet markets may favor range setups. Look for clear support and resistance, consider using oscillators for confirmation, and set profit targets that match the smaller moves available. Lower time frames may offer more setups, but they also bring more noise.
Don’t assume lower volatility calls for a larger position or an automatically tighter stop. Position size should still follow your risk limit, while the stop should sit where the trade idea is proven wrong. A tight stop can get clipped by ordinary noise, and a larger position can turn a small breakout into an expensive lesson.
If there’s no clean range, trend, or catalyst, the best trade may be no trade. Protecting your capital is also part of the job.
Watch for the next game changer
Just because there’s no catalyst today doesn’t mean there won’t be any market-moving report tomorrow.Look at economic reports collectively and see if there are any changes that might alter a central bank’s policy bias. Listen to central banker speeches for any hints of policy changes in the near future.
Scan your news feeds and keep up with the forex grapevine for any issues or tidbits that might look like the next market-mover for the major currencies.
Last but definitely not least, you can also pay attention to overall risk sentiment for possible trade opportunities. Just make sure you stay flexible enough to weather any extra volatility!
Adapt without forcing trades
Consistently profitable traders are not one-trick ponies. They recognize different market conditions and adjust their tactics, targets, and expectations.
That doesn’t mean forcing trades when there aren’t any worthwhile moves. Build a playbook for quieter markets so you can act when a solid setup appears and sit on your hands when it doesn’t.
This article draws on several cross-asset relationships, from commodity prices affecting specific currencies to bond and equity flows, that form the core of intermarket analysis. Premium members can read our lesson:
📖 What Is Intermarket Analysis?
Reading this helps you understand how commodities, bonds, and equities connect to currency moves, which cross-asset relationships matter most for forex traders, and how to apply that framework when traditional catalysts aren’t driving the market.
And if you’re not a Premium subscriber yet, now’s a good time to consider joining.
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