Make $100 A Day With This Volatility 75 Index Strategy for Beginners

Understanding Volatility 75 Index

The Volatility 75 Index is a synthetic index provided by Deriv that mimics real-world markets. Unlike traditional markets, this index is not affected by news or volume. It is computer-generated, allowing traders to rely solely on technical analysis. The Volatility 75 Index is a favorite among traders for two main reasons.

Firstly, it allows traders to use a very small lot size of 0.001, known as the Nano lot. This means that even with a small account balance, traders can participate in the market with as little as $1 or $5.

However, many traders struggle with calculating their stop losses and take profits when trading the Volatility 75 Index. This is a crucial aspect of risk management that should not be overlooked. In the following sections, we will explore a simple strategy for position sizing and risk management when trading this index.

Calculating Stop Losses and Take Profits

When trading currencies, traders typically calculate their stop losses and take profits in pips. However, when trading synthetic indices like the Volatility 75 Index, pips are not used. Instead, traders use points to measure the distance between their entry and stop loss or take profit levels.

To calculate the number of points from your entry to your stop loss or take profit level, simply measure the distance on the chart and multiply it by your lot size. For example, if the distance is 1743 points and your lot size is 0.001, the total risk would be 1.74 cents.

This method allows traders to determine their risk in dollars and adjust their position size accordingly. It is essential to know how much you are risking on each trade to effectively manage your account and protect your capital.

A Simple Strategy for Trading Volatility 75 Index

To trade the Volatility 75 Index successfully, it is important to use a strategy that takes advantage of its volatility. Instead of relying on trend reversal strategies, which may work well in other markets, we want to capture existing moves and follow the trend.

This strategy involves using two indicators: the RSI (Relative Strength Index) for trend identification and a moving average for entries. The RSI helps determine if the market is in an uptrend or downtrend, while the moving average confirms entry points.

To implement this strategy, follow these steps:

1. Add the RSI indicator to your chart with a period of 14 and levels of 50 and 50. This will help identify whether the market is overbought or oversold.

2. Look for a crossover above the level 50 on the RSI. If the RSI crosses above 50, it indicates an uptrend. If it crosses below 50, it indicates a downtrend.

3. Confirm the trend by checking if the market price crosses above or below the 21-period moving average. If the market price crosses above the moving average, it confirms a buy signal. If it crosses below, it confirms a sell signal.

4. Place a buy trade when the RSI crosses above 50 and the market price crosses above the 21-period moving average. Set your stop loss below the moving average and your take profit at two or three times the risk.

5. Place a sell trade when the RSI crosses below 50 and the market price crosses below the 21-period moving average. Set your stop loss above the moving average and your take profit at two or three times the risk.

By following this strategy, traders can take advantage of the volatility in the Volatility 75 Index and potentially make profitable trades. It is important to test the strategy on different time frames and adjust the risk and take profit levels according to your trading style and risk tolerance.

Frequently Asked Questions

Q: What is the Volatility 75 Index?

The Volatility 75 Index is a synthetic index provided by Deriv that mimics real-world markets. It is not affected by news or volume and can be traded based on technical analysis.

Q: How can I calculate my stop losses and take profits when trading the Volatility 75 Index?

To calculate your stop losses and take profits, measure the distance in points from your entry to your desired levels. Multiply this number by your lot size to determine the risk in dollars.

Q: What is the recommended strategy for trading the Volatility 75 Index?

A simple strategy for trading the Volatility 75 Index involves using the RSI indicator for trend identification and a moving average for entry signals. Buy when the RSI crosses above 50 and the market price crosses above the moving average, and sell when the RSI crosses below 50 and the market price crosses below the moving average. Set your stop loss below the moving average for buy trades and above the moving average for sell trades. Take profits should be set at two or three times the risk.

Q: Can I use this strategy on different time frames?

Yes, this strategy can be applied to different time frames. It is recommended to test the strategy on various time frames and adjust the risk and take profit levels accordingly.

Q: Is this strategy guaranteed to be profitable?

No trading strategy can guarantee profits. Results may vary, and it is important to test the strategy and adapt it to your trading style and risk tolerance. Risk management and proper position sizing are crucial for long-term success in trading the Volatility 75 Index.